WASHINGTON, D.C. – Congressman Clay Higgins (R-LA) has introduced H.R. 3476, a bill that repeals the cover-over of federal excise tax revenue from rum production and allows rum producers in the continental United States to better compete with producers in Puerto Rico and the U.S. Virgin Islands (USVI).
Federal excise taxes collected on rum in the United States, Puerto Rico, and the U.S. Virgin Islands are returned to the treasuries of Puerto Rico and the USVI. This revenue transfer is referred to as the cover-over.
“Tax revenues collected from U.S. companies should be used in a manner that benefits our entire economy, however in our domestic rum industry, these funds are taxed and collected equally but then sent in their entirety to Puerto Rico and the U.S. Virgin Islands. This creates an unlevel and clearly unfair playing field, which disrupts innovation and prosperity,” said Congressman Higgins. “Our economy thrives when Congress practices and maintains free market principles and open competition, and this piece of legislation is a step in that direction.”
Between 1994 and 2011, the rum cover-over program has returned nearly $7.2 billion to Puerto Rico and the USVI, which has been used to both directly and indirectly subsidize rum production in those territories.
Removing the federal excise tax cover-over would yield an estimated $6 billion windfall to the U.S. Government over the next 10 years.
The legislation has received support from the following organizations:
- American Distillery Institute (ADI)
- American Craft Spirit Association (ACSA)
“It’s tough to compete in the U.S. rum market when the two biggest selling brands that dominate the market are subsidized by their governments using U.S. federal excise tax refund checks. Our own U.S. Government is competing against us. The proposed Rum Cover Tax Repeal Bill, number H.R. 3476, will be a big step to level the playing field for USA sourced and distilled rums, like our Bayou Rum. I applaud Representative Clay Higgins for taking this bold step on behalf of all the USA craft rum distillers,” said Trey Litel, President and Co-Founder of Bayou Rum.
There are more than 160 rum producers in the continental United States, spanning 39 states. Congressman Higgins recently toured the Bayou Rum distillery in Lacassine, LA to discuss legislative efforts to repeal the rum tax cover-over program and create a level playing field for American rum.
Learn more about the rum tax cover-over here.
