Let Ethanol Tax Credit and Tariff Expire — Congress “Can Do Good Just by Doing Nothing”

CEI colleague Marlo Lewis skewers the ethanol tax credit and the tariff, due to expire at year-end.  Lewis points out that letting the 45¢ per gallon Volumetric Ethanol Excise Tax Credit (VEETC) and the 54¢ per gallon tariff on imported ethanol expire would help cut the deficit by $25-30 billion over the next five years.  He notes that besides these taxpayer costs, with the tariffs on less expensive ethanol imports – from Brazil, for example — consumers pay more at the pump, and, with the diversion to growing corn for fuel instead of food, consumers also find their food costs rising.

Here’s his hard-hitting conclusion:

Defenders of the statist quo claim that ending the tax credit and tariff will eliminate more than 100,000 jobs. That is sheer hype. As already noted, ethanol production is chiefly determined by the mandate, which is not scheduled to expire. The Iowa State study indicates that the U.S. corn ethanol industry would lose about 1,000 jobs over the next five years. A $30 billion subsidy to save 1,000 jobs is too high a high price to pay.

The ethanol lobby likes to portray itself as an infant industry in need of special protection – a valiant little David challenging the Goliath of Big Oil. In reality, the U.S. ethanol industry is the world’s biggest and governments at all levels have been subsidizing it for decades. Enough is enough.

The November elections were a sharp rebuke to arrogance and fiscal irresponsibility in the nation’s capital. If the lame-duck Congress got the message, they’ll let the VEETC and tariff tumble into history’s dustbin. They can do good just by doing nothing – surely there’s a lesson in that too.