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originally posted by the Washington Times:
We may be witnessing the single worst example of corporate welfare in a generation. With all due respect to the crowd favorite, Archer Daniels Midland, the new contender essentially could give its product away and still make a profit – thanks to the generosity of the American taxpayer.
At the heart of the rip-off is a policy known as the “cover over” tax subsidy, which provides Puerto Rico and the U.S. Virgin Islands (USVI) a rebate on the federal excise taxes U.S. consumers pay when they buy rum produced in those territories. There are virtually no restrictions on the use of the money – though Puerto Rico currently uses 94 percent of the revenues to support investments in infrastructure, health, education and environmental preservation. (The additional 6 percent is spent on marketing for the island’s rum industry.)
To increase its revenue from the program, the Virgin Islands’ government two years ago signed an agreement with the British liquor conglomerate Diageo in which the company agreed to move its Captain Morgan rum distillery from Puerto Rico to USVI. Under the agreement, which makes the federal government‘s policy of paying farmers not to grow crops look penurious, the USVI government will give Diageo nearly half of all cover-over revenues generated by Captain Morgan sales. Read the rest of this entry »