Ran­gel rakes in cash from all sides dur­ing is­land rum scrum

The Washington Times Weekly - - Politics - BY S.A. MILLER

The out­come of a leg­isla­tive tus­sle over rum taxes be­tween Puerto Rico and the U.S. Vir­gin Is­lands re­mains in doubt, but there is al­ready one clear win­ner — the House’s top tax writer, Rep. Charles B. Ran­gel, a New York Demo­crat who is pock­et­ing cam­paign cash from both ter­ri­to­ries.

At is­sue are com­pet­ing bills that could make or break a deal that lured rum pro­ducer Cap­tain Mor­gan from its long­time home in Puerto Rico to a new fa­cil­ity in the Vir­gin Is­lands with the prom­ise of bil­lions of dol­lars in sub­si­dies to the liquor com­pany paid out of U.S. rum taxes.

Puerto Rico wants to dras­ti­cally limit the amount of U.S. rum tax money the is­lands can give di­rectly to the liquor in­dus­try, while the Vir­gin Is­lands wants to make per­ma­nent the rum-tax re­bates to the ter­ri­to­ries, a change that would bol­ster its 30-year agree­ment to sub­si­dize the pro­duc­tion of Cap­tain Mor­gan.

Mr. Ran­gel, a 20-term in­cum­bent and chair­man of the pow­er­ful House Ways and Means Com­mit­tee, in­sists he is not be­ing in­flu­enced to pick a win­ner in the is­land fight.

“My fa­vorite is the one that car­ries the most votes,” Mr. Ran­gel said of the two bills be­ing vet­ted by his com­mit­tee.

Mr. Ran­gel, who faces a sepa- rate in­ves­ti­ga­tion by the House ethics com­mit­tee for al­legedly fail­ing to re­port mil­lions of dol­lars in ex­tra in­come and busi­ness trans­ac­tions, said he was not even be­ing strongly lob­bied on the bills.

“Be­sides Puerto Rico, you are the only one who has asked about it,” he told The Wash­ing­ton Times.

But the U.S. Com­mon­wealth of Puerto Rico isn’t just ask­ing Mr. Ran­gel about the leg­is­la­tion.

It has shot up to sec­ond in the rank­ing of places from which Mr. Ran­gel col­lected cam­paign con­tri­bu­tions in the cur­rent elec­tion cy­cle, ac­cord­ing to data com­piled by CQ MoneyLine.

Donors in Puerto Rico poured $36,600 into Mr. Ran­gel’s war chest, an amount sur­passed only by the $138,400 from donors in his home state of New York.

In four of the five pre­vi­ous years, the Vir­gin Is­lands ranked in the top 10 sources for con­tri­bu­tions to Mr. Ran­gel. Puerto Rico didn’t make the list in any of those years.

Con­tri­bu­tions to Mr. Ran­gel from the Vir­gin Is­lands to­taled more than $167,00 be­tween 1999 and 2008. More than half of that — $84,800 — was given dur­ing the 2007-08 elec­tion cy­cle, just as the is­lands sealed the deal to re­lo­cate Cap­tain Mor­gan and give the liquor com­pany about $2.7 bil­lion in tax cred­its and other sub­si­dies over 30 years.

Me­lanie Sloan, ex­ec­u­tive di- rec­tor of Cit­i­zens for Re­spon­si­bil­ity and Ethics in Wash­ing­ton (CREW), said such cam­paign con­tri­bu­tions are not il­le­gal un­less there is a quid pro quo, or an agree­ment by the mem­ber for spe­cific leg­isla­tive action in ex­change for the money.

Still, she said she had no doubt the con­tri­bu­tions were in­tended to sway Mr. Ran­gel. Oth­er­wise, Puerto Rico and the Vir­gin Is­lands would have been con­tribut­ing to the law­maker long be­fore the rum tax is­sue came to the fore.

“It’s de­press­ing, but it is not il­le­gal,” she said. “One would hope mem­bers of Congress would not be in­flu­enced by cam­paign do­na­tions, but they ob­vi­ously are, or else peo­ple wouldn’t be mak­ing cam­paign do­na­tions.”

Puerto Rico and the Vir­gin Is­lands re­ceive most of the $13.75 tax levied on each gal­lon of rum im­ported from their ter­ri­tory, a to­tal of about $470 mil­lion a year re­turned to the is­lands in what is known as a tax “cover over.”

The pay­ments did not get much at­ten­tion un­til re­cently, when the Vir­gin Is­lands won the re­lo­ca­tion deal by agree­ing to spend much of its share on huge sub­si­dies — in­clud­ing pay­ing for a $165 mil­lion rum dis­tillery it built on St. Croix — to Cap­tain Mor­gan’s owner, Lon­don-based Di­a­geo. Di­a­geo is the world’s largest al­co­holic bev­er­age com­pany, with brands that also in­clude Smirnoff, John­nie Walker, Bai­leys, J&B, Jose Cuervo, Tan­queray, Guin­ness and Crown Royal.

Cap­tain Mor­gan, a spiced rum named af­ter 17th-cen­tury Bri­tish pri­va­teer Sir Henry Mor­gan, is the sec­ond most pop­u­lar rum brand in the world be­hind Bac­ardi, also a Puerto Ri­can rum. About 90 per­cent of Cap­tain Mor­gan sales are in North Amer­ica, ac­cord­ing to Di­a­geo.

Bac­ardi and Puerto Rico’s other lo­cal rums didn’t flinch at the Di­a­geo deal. The di­min­ished com­pe­ti­tion on the is­land is ex­pected to help their busi­nesses.

Puerto Rico’s bill would im­pose a 10 per­cent cap on the amount of rum tax rev­enue the is­lands can spend on di­rect sub­si­dies to rum pro­duc­ers. It would un­der­mine the fi­nanc­ing plan for the Vir­gin Is­lands’ Di­a­geo deal, but both sides say it would not stop the move by Cap­tain Mor­gan.

Puerto Rico’s del­e­gate to Congress, Demo­crat Pe­dro R. Pier­luisi, spon­sored the bill, which has seven co-spon­sors, in­clud­ing Reps. Jose E. Ser­rano, Ny­dia M. Ve­lazquez and Ways and Means Com­mit­tee mem­ber Joseph Crow­ley, all New York Democrats with siz­able Puerto Ri­can con­stituen­cies.

By con­trast, the Vir­gin Is­lands-backed bill would make the pay­ments to the is­lands per­ma­nent and se­cure on­go­ing fi­nanc­ing for the Di­a­geo sub­si­dies. Cur­rently, just $10 of the $13.75 per gal­lon tax is ded­i­cated to the is­lands. The re­main­ing $3.50 sent to the rum-pro­duc­ing ter­ri­to­ries is reau­tho­rized reg­u­larly by Congress.

The U.S. Trea­sury ends up with only 25 cents per gal­lon from the rum tax. The re­bates to the is­lands are in­tended to sup­port eco­nomic de­vel­op­ment and so­cial pro­grams, goals the Vir­gin Is­lands says will be achieved when Cap­tain Mor­gan cre­ates be­tween 150 and 300 jobs on the is­land.


Caribbean cash: Rep. Charles B. Ran­gel de­nies he is be­ing in­flu­enced in a tus­sle be­tween Puerto Rico and the U.S. Vir­gin Is­lands over rum taxes. His cam­paign has col­lected $36,600 in the cur­rent elec­tion cy­cle from donors in Puerto Rico.

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