I have a 2004 Ford Ranger pickup truck. I love it. I have a more “modern” car too, but that little truck is just a joy to have. And very useful for when you need… you know… a truck.
But old things have quirks. And my truck’s biggest quirk is that it has a wonky old radio in it. And that radio is stuck on NPR. You can change the volume (awkwardly), but that dial is stuck on NPR.
So when I’m driving around in my truck, all American and manly, I’m often doing so shaking my head at whatever nonsense NPR is up to at that moment.
A day or two ago during an outing in my truck, NPR regaled me with a story of “The Rum Wars”. It was on a show of theirs called Planet Money.
These “wars” featured the US territories of Puerto Rico and the Virgin Islands as the combatants. As NPR explained, the main exports of these places (not counting tourism) is rum.
Over 100 years ago, early on in the “US-ness” of these US territories, Congress decided to levy a federal tax on all sales of rum in the US, which would then be kicked back to these territories, proportional to where the rum was produced.
The reason given by NPR — and glossed over very quickly — was that it was “a scheme that was supposed to help these two US territories pay their bills” because “Congress didn’t want its territories to be too dependent on the federal government, so it would “look for ways to provide them with their own funding stream”.
That’s it. US rum drinkers are charged a fee that is shipped off to the local governments of Puerto Rico or the Virgin Islands. Why? To help them “pay their bills”.
These places are ruled by governments of their own, who have the legal right to levy taxes as they see fit. But for some weird reason Congress decided to “fund” them with this weird federal tax. I mean US residents pay federal taxes on all booze, but it usually just goes to the US treasury where it gets wasted on US cronyism.
But for rum, the bulk of the federal tax goes off shore. And exactly which shore it goes to depends on which island the rum was manufactured on. And in another weird twist, say the rum sold in the US was made somewhere else? The federal tax still goes to these two territories, split 50/50.
That’s all NPR has to say about this crony extortion scheme. The rest of the episode is all about how evil corporations are extorting these poor governments out of loot (that was already stolen from US rum drinkers like you and me) by moving their factories or threatening to do so.
The “rum wars” were kicked off when Captain Morgan moved from Puerto Rico to St. Croix in 2008. They were lured there by a deal proposed by the Virgin Island’s government by which they would be given a $165 million facility — paid for out of the new stream of tax receipts that come along with Captain Morgan’s relocation.
And that’s not all. The Virgin Islands would subsidize the production of molasses, the main ingredient in rum, along with kickbacks for their marketing budget and kickbacks for production quotas.
All that adds up to around $80 million a year in kickbacks, on top of that shiny new $165 million distillery.
The NPR hosts were especially galled by that tax-payer funded distillery. I wonder if they know about all the tax-payer funded sports stadiums we have in this country.
And of course, the Virgin Islands still comes out way ahead on the deal. Remember, this is all stolen money. They are only kicking about 40% of the taxes back to Captain Morgan. The Virgin Islands government still ends up netting around $100 million a year from the deal.
But of course, that’s not the end of the story. What the Virgin Islands can “poach”, Puerto Rico can “re-poach”. This is the perfect opportunity for a crony bidding war over who can negotiate the best deal for themselves over this stream of stolen money.
Prior to 2008 when Captain Morgan left them for St. Croix, Puerto Rico was subsidizing its rum industry (their biggest player being Bacardi) with kickbacks totaling around 10% of the incoming federal taxes.
By 2011, after losing in an effort in the US Congress to change the deal on this “scheme”, Puerto Rico upped its own kickback program to around 46% of the incoming federal taxes.
Which of course, prompted other rum companies in the Virgin Islands to try to get in on the deal. They demanded in on the kickbacks at the same percentages, threatening to leave for Puerto Rico if they aren’t included.
The rest of the episode, the NPR hosts rail about crooked “capitalists” and how unfair all this is. Their heads exploded when they learned that Captain Morgan was just one brand of liquor produced by a multi-national corporation headquartered in London.
So crooked! So unfair! These money-grubbing companies are pitting these poor island governments against each other!
That was the tenor of the last 60% of the show. Only at the very end did they go back and reflect that the money that all these entities are fighting over is money fleeced from US rum-buyers in the first place.
But they didn’t bring that point up to consider that stealing might be a bad thing with unintended negative consequences. They brought it up because in 2021, Congress “forgot” to re-instate a portion of the program, which they are required to do every few years for the scheme to stay in place.
NPR found this very sad. How will these territories survive without all this stolen booty?
That’s the thing about statists. They take statism (and all the inherent theft and coercion) as a given. They never question that basic premise.
And another thing. And maybe this is just me having an “old man shouts at cloud” moment, so take it with a grain of salt.
This episode of Planet Money I’m describing was interesting enough, I suppose. But the two voices that told the story sounded so young, and dumb, and unserious.
It came off like “news” for idiots.
Which, I guess makes sense for government-funded media. What else should I expect? At least it was interesting.
But I sure am glad I don’t get my understanding of history and economics from NPR, but instead use sources like Liberty Classroom. You might enjoy it too. Check it out. If you decide to join, it’ll help out my little Haman Nature project.
NPR sucks. But I still really love my truck. My neck hurts a little when I drive it though — from all the head-shaking.
Naturally,
Adam