Cover-over subsidies are annual payments from the

U.S. government The federal government of the United States (U.S. federal government or U.S. government) is the national government of the United States, a federal republic located primarily in North America, composed of 50 states, a city within a fede ...

to the

U.S. Virgin Islands The United States Virgin Islands,. Also called the ''American Virgin Islands'' and the ''U.S. Virgin Islands''. officially the Virgin Islands of the United States, are a group of Caribbean islands and an unincorporated and organized territory ...

and Puerto Rico out of federal excise taxes. 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, 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

References

{{DEFAULTSORT:Cover-Over Subsidies Subsidies United States federal taxation legislation

See also

References