As the TARP legislation was being thrown together and rubber stamped last September, Captain Morgan had a lot more to smile about. Buried in the midst of the tax breaks that were extended last fall was a seemingly innocuous one relating to a federal excise tax on rum. In 2008, Diageo Plc (which owns Captain Morgan) agreed to billions in tax breaks from the governor of the USVI in exchange for moving its rum production from Puerto Rico to St. Croix. Now, through that agreement and the TARP extension of a rebate on part of the excise tax, Diageo stands to gain about $2.7 billion in benefits over the next 30 years. No doubt somewhere on the desk of Max Baucus (who recommended the tax breaks) there's a cocktail napkin that reads 'The Captain was here'.
Bailout of U.S. Banks Gives British Rum a $2.7 Billion Benefit [Bloomberg]