Sens. Benjamin Cardin (D-Md.) and Tom Coburn (R-Okla.) have proposed legislation (S 520) that would repeal a production tax credit for ethanol producers that they hope will be incorporated into government funding legislation being debated in Congress as a way to cut federal spending.
The legislation would repeal the 45-cent-a-gallon Volumetric Ethanol Excise Tax Credit (VEETC) or "blenders tax credit" popular with the ethanol industry. The credit was extended through the end of 2011 in tax legislation signed into law in December 2010. Repealing the credit would save taxpayers $6 billion annually, according to Cardin and Coburn.
Both Cardin and Coburn pointed to a March 1 GAO report they said showed the tax credit was "largely unneeded today to ensure demand for domestic ethanol production." The report suggested that the tax credit for ethanol producers may be unnecessary given the federal renewable fuel standard, which sets a production requirement that will climb to 36 billion gallons of ethanol and "advanced" cellulosic biofuels by 2022.
"The ethanol tax credit is bad economic policy, bad energy policy and bad environmental policy," Coburn said in a statement. "The $6 billion we waste every year on corporate welfare should instead stay in taxpayers' pockets where it can be used to spur innovation, stimulate growth and create jobs."
According to Cardin and Coburn, ethanol-blended fuel is nearly a third less efficient than gasoline, has contributed to increased prices for food corn, and can cause engine damage in motor vehicles.
Responding to the proposal, National Farmers Union President Roger Johnson said "[I]t is unconscionable that Congress is even considering imposing road blocks to the development of home-grown, clean, renewable fuels. Dependence on foreign oil presents huge economic and national security vulnerabilities for our country, including driving up food prices at a time when many Americans are struggling to make ends meet.
"Biofuels must be allowed to compete with petroleum-based fuels so that consumers have a real choice at the pump instead of continuing to send billions of dollars overseas. Long before Congress should even consider reducing support for ethanol, they ought to be looking at the enormous subsidies for oil, which are ten times larger than those for ethanol."
Renewable Fuels Association President Bob Dinneen said the Cardin-Coburn proposal "threatens a fragile American economic recovery. In a statement, Dinneen added: [I]t makes no sense to deprive Americans of a lower cost choice at the gas pump or to stop America's investment in an American-made, job-creating alternative to foreign oil. If recharging our economy is a top fiscal and economic priority for these senators then Job One should be redirecting the $1 billion a day we spend on foreign oil back into the U.S. economy. Ethanol is part of the solution, not the problem."
