[Congressional Record Volume 156, Number 48 (Thursday, March 25, 2010)]
[Extensions of Remarks]
[Page E504]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




    SUPPORTING THE PEOPLE OF PUERTO RICO AND THE U.S. VIRGIN ISLANDS

                                 ______
                                 

                            HON. DAN BURTON

                               of indiana

                    in the house of representatives

                        Thursday, March 25, 2010

  Mr. BURTON of Indiana. Madam Speaker, I rise tonight to encourage my 
colleagues to support H.R. 2122, a bill introduced by our colleague 
Delegate Pierluisi to ensure that the cover-over tax levied on the rum 
exports from Puerto Rico and the U.S. Virgin Islands are used for their 
original intended purpose; namely to promote the general welfare of the 
territories' citizens in addition to promoting overall economic 
development. Currently, the funds are being used, in my opinion, to 
unfairly support blatant corporate welfare for a foreign-owned company. 
We do not need to be sending our tax dollars to foreign corporations 
when we have record unemployment in this country.
  Rum that is produced in either Puerto Rico or the U.S. Virgin 
Islands, and that is sold in the continental United States, is subject 
to the same Federal tax as rum produced in the States--roughly $13.50 
for each proof-gallon. However, in the case of the territories, the 
majority of the revenue is returned by the Federal government to the 
respective territory, and then the remainder is retained by the Federal 
government. This so-called ``cover-over'' tax provision--which has 
enjoyed strong bi-partisan support for many years--allows the 
territories to pay for important local programs.
  Unfortunately, this provision is now being abused to award a 
sweetheart deal to the British alcohol distiller and importer Diageo. 
Under the terms of this sweetheart deal, London-based Diageo will 
receive 46 percent of the U.S. Virgin Islands' cover-over to pay for a 
new distillery. Madam Speaker, Diageo is worth roughly $35 billion 
according to the latest figures. To give Diageo 46 percent of the funds 
intended for the general welfare of the people of the Virgin Islands, 
in my opinion, violates the spirit if not the letter of the law. If 
this type of manipulation is allowed, many experts believe, a race to 
the bottom will result, with the territories attempting to poach 
businesses from each other with larger and larger sweet-heart deals 
paid for by the cover-over funds.
  For example, Puerto Rico currently receives about $400 million in 
carry-over funds per year. From that pool of money, Puerto Rico pays 
about six percent to the company, Rums of Puerto Rico, and Puerto Rican 
law states that no more than 10 percent of the funds it receives from 
the rum cover-over program can be used to subsidize rum producers on 
the island. This is a reasonable approach. It ensures that Puerto Rico 
can attract businesses to the island while still having the resources 
to carry out public works projects.
  H.R. 2122 carries forward this common-sense approach. Under the terms 
of the bill, either Puerto Rico or the U.S. Virgin Islands may use its 
cover-over funds to provide unfair subsidies to rum producers. Further, 
if it is determined by the Secretary of the Treasury that a territory 
has unfairly subsidized a rum producer, the Secretary can transfer some 
of the cover-over funds intended for that territory that provided the 
unfair subsidy to the territory that has been disadvantaged. The 
legislation defines ``unfair'' or ``per se unreasonable'' if the 
subsidy exceeds ten percent of the covered-over amount returned to the 
territory's treasury.
  Madam Speaker, let us remember the original intent of the cover-over 
funds, which was to help the territories fund important civil programs 
for the benefit of the people of Puerto Rico and the Virgin Islands. 
The purpose was most certainly not to provide corporate welfare to 
large foreign-owned conglomerates. H.R. 2122 will ensure that the 
original purpose of the cover-over tax--to advance the general welfare 
of the citizens--is being carried out. I urge my colleagues to support 
this common-sense bill.

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