Tax-Subsidized Ethanol Boondoggle Set to Expire

Tax-Subsidized Ethanol Boondoggle Set to Expire

Coalition Urges Congress to End Tax Breaks, Tariff Protection for Ethanol
October 21, 2010

Washington, D.C., October 21, 2010 — Special tax credits and tariff protection for ethanol are set to expire at the year’s end. To counter the corn ethanol lobby, which urges Congress to reauthorize these special-interest giveaways plus enact new mandates and subsidies, a coalition of free-market groups advises Congress to “do nothing” and let the clock run out on the tax credit and tariff.

The domestic ethanol industry currently enjoys a 45¢ per gallon “Volumetric Ethanol Excise Tax Credit” (VEETC), which costs taxpayers $5-6 billion annually, and a 54¢ per gallon protective tariff, which prevents lower-cost Brazilian ethanol from competing in U.S. markets.

“Congress has a rare opportunity to avoid $25-30 billion in new deficit spending, ease consumers' pain at the pump, and scale back political manipulation of energy markets by literally doing nothing,” the coalition told Congress in a letter today.

The groups issuing the joint letter are the Competitive Enterprise Institute, Freedom Action, the American Conservative Union, FreedomWorks, the National Taxpayers Union, and the National Center for Public Policy Research.

The coalition released its letter today because Agriculture Secretary Tom Vilsack held a press conference this morning announcing new Obama Administration biofuel initiatives. Vilsack said the VEETC should be extended on a “short-term, fiscally responsible” basis, but would not define what that means. Similarly, he said the tariff should “eventually” expire, but would not propose a timetable for phasing it out.

“In 2006, when Secy. Vilsack was Governor of Iowa, he said the exact same things – that the tariff and tax credit eventually had to end,” said Marlo Lewis, Senior Fellow at the Competitive Enterprise Institute. “Gov. Vilsack didn’t say then when the phase out should start – and Secy. Vilsack is still not saying.” A video excerpt of Gov. Vilsack’s 2006 remarks on ethanol is available on Youtube.

“For fiscal, humanitarian, and environmental reasons, the ethanol tariff and tax credit must go,” said Lewis.

Read the full coalition letter here.

For more on ethanol policy, visit GlobalWarming.org

See also: Marlo Lewis in National Journal