Huffpost Business
The Blog

Featuring fresh takes and real-time analysis from HuffPost's signature lineup of contributors

Miguel D. Lausell Headshot

Tax Subsidies for Wealthy Foreign Corporations? How Congress Has Already Broken its Most Important Promise

Posted: Updated:

In 2008, the Democratic Party Platform criticized the previous eight years of Republican failures: "These are not just policy failures. They are failures of a broken politics -- a politics that rewards self-interest over the common interest and the short-term over the long-term, that puts our government at the service of the powerful. A politics that creates a state-of-the-art system for doling out favors and shuts out the voice of the American people." Sadly, a mere two years later, we Democrats are already guilty of the same failures.

Despite numerous appeals to Senate Majority Leader Harry Reid, House Speaker Nancy Pelosi and then-Chairman of the Ways and Means Committee, Charlie Rangel, lawmakers allowed a British liquor conglomerate to abscond with $6 billion of tax revenue that was intended for the general welfare of the U.S. Virgin Islands. The party leadership's failure on this issue is epic.

Rather than protect about 350 union jobs, Democratic lawmakers have allowed British-owned Diageo to move to the U.S. Virgin Islands where they will take about half of the Federal tax subsidy on rum, in order to provide the U.S. Virgin Islands 40 jobs in exchange for a $6 billion gift from US taxpayers. Not only are these jobs non-union, Diageo is guaranteeing that only 32 of the jobs will be filled with locals from the U.S. Virgin Islands. American taxpayers are paying more than $3 million per year for each of these non-union jobs for locals. Government is in the service of Diageo -- it appears to be actively promoting the company with tax dollars that were intended to support the general welfare of our citizens in the U.S. territories.

Diageo is receiving an average of $100 million per year in corporate tax breaks, sugar subsidies and direct payments. That is enough money for every child in the U.S. Virgin Islands to receive over $3,000 per year for their current or future educational expenses. This money could more than double what the territory currently spends for its combined Health and Human Services and Department of Health budgets. Instead, these funds will be lining the pockets of British corporate executives and their shareholders.

While this may sound like a Republican corporate welfare scheme, this happened on Democrats' watch -- and with our complicity. Legislation (HR 2122) was introduced before Congress to set a ten percent cap on the amount of Cover Over revenue that can be paid directly to a rum producing company. As then-Chairman of the U.S. House Ways and Means Committee, Charlie Rangel was able to block this legislation imposing corporate kickback limits from leaving his Committee.

By keeping the legislation from seeing the light of day, Rangel denied American taxpayers the opportunity to learn about and publicly debate the appropriate use of federal tax revenues and financial support for our nation's territories. As a result, lawmakers shut out the voice of the American people before we had a chance to speak. For example, Puerto Rico uses 94 percent of this federal tax rebate to support investments in infrastructure, health, education, and environmental preservation. The additional six percent is being spent to promote the territory's rum industry. Local law limits to ten percent the amount that can be used for this purpose. Why should we allow a highly profitable, union-busting British company take a $6 billion gift from the US treasury at a time when our local economy needs that money reinvested in our soil.

Another result of Congress' stalling the bill in committee is that Diageo will now receive subsidies worth more than twice their production costs. Basically, they will make substantial profit -- while workers receive less than a pittance in return.

Any which way you look at this sweetheart deal, you realize it was designed only to benefit the British company. From the initial gifts of the state-of-the-art distillery, to the $50 million "start-up" funding, to the 50% of the tax subsidy, to all additional local tax incentives, to the unbelievable subsidy on molasses, this deal is a major gift to a very wealthy foreign company at the expense of U.S. taxpayers. Should we be worried about another corruption scandal here? It is very strange that with so much money at stake here there has been absolutely no debate in Congress over this deal.

When Republicans controlled government, Democrats promised a new era of ethics and responsibility. Handing $6 billion to a profitable British liquor conglomerate is exactly the kind of unethical policy that Democrats promised to end. Allowing funds intended for the general welfare to be diverted to corporate pockets sounds like an exaggeration from the pen of Charles Dickens.

The union workers who lost their jobs and the American people who put us in control of government in the last election are owed -- at a minimum -- an apology. Instead of putting a stop to this outrageous corporate thievery, lawmakers were complicit in this betrayal of workers.

Lawmakers should immediately allow this legislation to move forward -- allowing the public to debate the appropriate use of tax dollars in supporting corporations. In fact, they should go a step further and oppose any attempt to directly pay corporations a dime. After all, if this program is going to be used to allocate $6 billion for just 40 jobs, we should strongly consider eliminating this tax subsidy altogether.

If this is the kind of "change" that we Democrats are willing to deliver to the American people, then we do not deserve to lead.