When you buy a bottle of rum in the United States, by law nearly all the federal taxes on that rum must be sent to Puerto Rico and the U.S. Virgin Islands. It's an unusual system that Congress designed decades ago to help fund these two U.S. territories. In 2021 alone, these rum tax payments added up to more than $700 million. Puerto Rico and the Virgin Islands split the money according to how much rum each territory produces. And the territories produce a lot of it — especially Puerto Rico, which single handedly supplies the majority of the rum that Americans drink. But in 2008, the U.S. Virgin Islands pulled off a coup. It convinced one of the largest rum brands in the world, Captain Morgan, to abandon Puerto Rico and to shift its operations to the tiny island of St. Croix. This was the beginning of the Rum Wars. On today's show, the story of how a scheme designed to help Puerto Rico and the U.S. Virgin Islands turned them into bitter rivals. And how it ended up putting hundreds of millions of dollars a year — U.S. taxpayer dollars — into the pockets of big liquor companies instead. This episode was hosted by Jeff Guo and Sarah Gonzalez. It was produced by James Sneed with help from Sam Yellowhorse Kesler. It was edited by Molly Messick, engineered by Cena Loffredo, and fact checked by Sierra Juarez. Alex Goldmark is Planet Money's executive producer. Help support Planet Money and get bonus episodes by subscribing to Planet Money+ in Apple Podcasts or at plus.npr.org/planetmoney. Learn more about sponsor message choices: podcastchoices.com/adchoices NPR Privacy Policy
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This is St.
Croix in the US Virgin Islands.
It's a caribbean paradise.
Pink and cream colored buildings, roosters are everywhere.
There's a harbor dotted with yachts and catamarans.
On the boardwalk, people are having drinks and watching the seaplanes take off.
The economy here mainly runs on tourism, but our trip took us away from the beach and the palm trees because we were here for something else.
Ooh, this street is bumpy.
You see, these days, there is only one major product that the Virgin Islands produces.
Rum, and lots of it.
That is what we were here for, the rum.
Oh, my gosh.
Is that it?
Holy.
That's huge.
In particular, producer James Snead and I are here for one of the biggest rum distilleries in the world.