AUGUST 13, 2010
While the focus of Charles Rangel’s ethics charges center on doing legislative favors for donors and failing to pay taxes, his most troubling lapse—enriching a foreign liquor company with billions of U.S. tax dollars—continues to be largely ignored.
The House Ethics Committee’s recent charges against the veteran Democratic congressman from Harlem fail to mention his most serious transgression, one that will end up costing U.S. taxpayers about $6 billion. A hard-hitting piece in a conservative news website offers the gory details of Rangel’s dirty little deal to enrich a British rum company and raises a logical question; what’s in it for him?
Rangel helped mastermind a shady deal that gives London-based conglomerate Diageo billions of tax dollars to relocate from one unincorporated American territory (Puerto Rico) in the Caribbean to another (Virgin Islands) for no apparent reason. Uncle Sam will give the European booze maker nearly $3 billion in tax credits and benefits, help it build a new $165 million state-of-the-art rum distillery, allow it to take half of the Virgin Islands’ rum-tax money, a 90 percent income-tax break and a property tax exemption.
The move will drastically boost Diageo’s already lucrative profits—and cheat the U.S. government out of much-needed tax revenue—because it will slash in half the amount of taxes the liquor company currently pays for each gallon of rum. For years the rum has been produced in Puerto Rico, where a law caps the amount of tax rebate that can be kicked back to manufacturers. The Virgin Islands have no such rule, making it a far more profitable place to do business.
When lawmakers got wind of Diageo’s new accord, many led an effort to pass legislation limiting the amount of rum tax money that can go to corporations since the funds go back into the community to pay for things like schools and environmental preservation. Rangel, who at the time chaired the tax-writing
Essentially, Rangel diverted money from schools into tax breaks for a liquor conglomerate, according to an in-depth story published by an investigative news organization earlier this year. Incidentally, the Virgin Islands governor who helped broker the deal is also facing a litany of ethics charges for misappropriating federal funds.
This is not to say that Rangel’s other corrupt acts aren’t relevant. After all, the 20-term congressman is under investigation for tax evasion, using his office to raise money from corporations with business before him, illegally accepting multiple rent control apartments in his
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