Putting the cork in endless Rum funding

Senator Crapo Should Lead the Charge to End Foreign Rum Subsidies and Put Idaho First

The last election made it clear that Americans are ready for bold, conservative reforms. Finally, Washington D.C. is finally looking for ways to make the federal government more efficient. As the Trump administration looks for waste, fraud, and abuse to eliminate, there is one bit of low-hanging fruit that seems to be getting overlooked: the various tax carve outs and giveaways to the rum distilling industry. If you’re like most people, you have no idea about the hundreds of millions of dollars in corporate welfare gifted to this sector annually. We should address obscure tax loopholes and shady schemes like Section 5010 and the Rum Cover-Over (RCO) Program. Rather than giving money away to non-American foreign distillers, we should be using these taxpayer dollars for something useful, like funding a permanent extension of the Trump tax cuts, which make a tangible positive difference to everyday Idaho families.

There’s a reason you’ve probably never heard of RCO and Section 5010 –they don’t really benefit you. They relate to the way rum is taxed. The RCO program, in theory, redistributes excise taxes on rum to support public services in Puerto Rico and the U.S. Virgin Islands. This amounts to a huge amount of money; in 2023, some $670 million were returned to these U.S. territories under the RCO program. The problem is that RCO is notorious for its lack of transparency, and as a result, up to 30% of this funding ($250 million annually) ends up siphoned off as tax subsidies to large, foreign-owned rum producers.

Then there’s the Section 5010 tax loophole, which, similarly, benefits rum distillers. It allows them to lower their tax burden dramatically by blending other ingredients into their products, like high-potency wine and “non-beverage flavorings.” The resulting tax savings add up to over $300 million every year for these distillers. Shockingly, there are no labeling requirements to disclose these cost-saving additives, so most folks don’t even know about these foreign ingredients they’re consuming, let alone that distillers make money off this bizarre boondoggle.

Imagine for a moment if we ended these highly specific carve outs that mostly benefit a niche, and largely foreign-owned, sector of the economy, and instead put the money saved toward paying for continuing the Trump tax cuts. Ultimately, in electing President Trump last year, the American voters were not calling for more corporate welfare. They were demanding an end to the waste, fraud, and abuse that is rampant in our government and our tax system. And they were calling for an end to Americans getting fleeced by foreign corporations.

By reforming the RCO program and ending section 5010 loophole, we can take meaningful steps in the right direction. Senator Mike Crapo (R-ID) and his colleagues in the Idaho delegation in Congress can address these policy changes. After all, what good is a tax break or subsidy that mostly helps big international corporations, not Idahoans like you and I? It is time to make sure our tax code puts Idaho families – and all Americans— first, not international rum distillers.

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About the Author

Amos Rothstein is former Executive Director of the Idaho Republican Party and an election Precinct Committeeman for the Ada County Republican Party in Precinct 1921.

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