Cover-over
subsidies
A subsidy or government incentive is a form of financial aid or support extended to an economic sector (business, or individual) generally with the aim of promoting economic and social policy. Although commonly extended from the government, the ter ...
are annual payments from the
U.S. government to the
U.S. Virgin Islands and
Puerto Rico
Puerto Rico (; abbreviated PR; tnq, Boriken, ''Borinquen''), officially the Commonwealth of Puerto Rico ( es, link=yes, Estado Libre Asociado de Puerto Rico, lit=Free Associated State of Puerto Rico), is a Caribbean island and unincorporated ...
out of federal
excise taxes
file:Lincoln Beer Stamp 1871.JPG, upright=1.2, 1871 U.S. Revenue stamp for 1/6 barrel of beer. Brewers would receive the stamp sheets, cut them into individual stamps, cancel them, and paste them over the Bunghole, bung of the beer barrel so when ...
. For example, when a bottle of rum is produced in either the Virgin Islands or Puerto Rico, and then sold in the United States, the federal excise tax on that bottle is returned to its place of production. Cover-over subsidies for U.S. island territories began in 1917. In 2008, the taxes generated about $371 million for Puerto Rico and $100 million for the Virgin Islands.
In April 2009, Puerto Rico's congressional representative,
Pedro Pierluisi
Pedro Rafael Pierluisi Urrutia (born April 26, 1959) is a Puerto Rican politician and lawyer currently serving as governor of Puerto Rico. He has previously served as Secretary of Justice, Resident Commissioner, acting
Secretary of State, i ...
, introduced a bill prohibiting territories from using more than 10 percent of their cover-over receipts for industry specific subsidies. This was as a result of increased competition to source distillery production between Puerto Rico and the U.S. Virgin Islands.
[Timothy P. Carney, Subsidies on trial in Caribbean rum rumble, Washington Examiner (Nov. 18, 2009), available at http://www.washingtonexaminer.com/politics/Subsidies-on-trial-in-Caribbean-rum-rumble-8546430-70300937.html#ixzz0h9QHzY8l ]
See also
*
Economy of Puerto Rico
The economy of Puerto Rico is classified as a high income economy by the World Bank and as the most competitive economy in Latin America by the World Economic Forum. The main drivers of Puerto Rico's economy are manufacturing in Puerto Rico, man ...
*
Economy of the United States Virgin Islands
The economy of the United States Virgin Islands is primarily dependent upon tourism, trade, and other services, accounting for nearly 60% of the Virgin Island's GDP and about half of total civilian employment. Close to two million tourists per yea ...
References
{{DEFAULTSORT:Cover-Over Subsidies
Subsidies
United States federal taxation legislation