Guess who’s fighting extension of VEETC: Big Food and Big Oil

(“Ethanol Tax Credits Face Stiff Fight” by BILL LAMBRECHT, POST-DISPATCH WASHINGTON BUREAU CHIEF)

WASHINGTON Ethanol’s extended run of taxpayer backing could be in jeopardy.

A coalition of opponents to the corn-based fuel is working to block the extension of billions of dollars in biofuels tax credits, set to expire at year’s end.…

But when Illinois and Missouri members of Congress opened a new effort recently to extend the tax breaks, a phalanx of opponents quickly mobilized. They include the Grocery Manufacturers of America, the American Meat Institute, the National Council of Chain Restaurants, environmental organizations and pro-taxpayer groups.

Opponents have come up short in the past when trying to match the clout of ethanol and the farm lobby. This time, they claim their odds are better as a result of new spending rules in Congress designed to limit government giveaways. In ethanol’s case, supporters would need to find equivalent cuts to continue roughly $5 billion worth of tax credits.

Rep. John Shimkus of Collinsville, ranking Republican on the House Energy and Commerce Committee, is co-leader of the House effort to extend the tax breaks for five more years, to 2015. He’s also pushing to extend expiring tariffs on ethanol imported from Brazil and other countries. Other co-sponsors include: GOP Reps. Blaine Luetkemeyer of St. Elizabeth and Jo Ann Emerson of Cape Girardeau, and Rep. Jerry Costello, D-Belleville.

Our Take:
This anti-ethanol gang’s ploy reminds us of the non-sensical rantings you hear about the cost of a loaf of bread or a haircut. They should both cost a dime right? Well, corn growers were paid two dollars a bushel since it cost 13 cents for a loaf of bread. (Corn first hit two dollars a bushel in 1947, and remained steadily in the two dollar range from 1974 (bread = 28 cents, until 2005, when ethanol helped raise corn prices).

The big processed food companies want to go back to days when they paid less for farm products than those grains and cereals cost to produce. They were very happy for the government…in other words, the taxpayer, to pay the difference.

We are surprised that taxpayers’ leagues aren’t a little more sophisticated than this. As has been found in numerous studies, the 45-cent VEETC credit paid to oil companies and fuel blenders to convince them to use ethanol then generates many multiples in economic activity. The ethanol industry contributes $53.3 billion dollars annually to the Gross Domestic Product, producing $8.4 billion dollars in federal revenues—subtract the $5 billion for VEETC and you still have a $3.4 billion surplus to the US treasury (2010, Urbanchuk). Local and state government units reap $7.5 billion in revenue from the ethanol industry.

The day will come when oil and gas no longer command huge subsidies and no longer enjoy a de facto monopoly on transportation energy—the ethanol tax credit is helping to build a foundation for that secure energy future. In the meantime, VEETC is an investment whose returns show that it would be penny wise-pound foolish to end the incentive.

Our guess about why the oil companies oppose a system that pays them? They love bargains. Who doesn’t? The stress that the loss of the tax incentive creates in the US ethanol industry would cause many to put the ‘for sale’ sign in the window. During the worst stretch of the Recession, oil companies Valero and Sunoco bought ethanol plants for as little as a dime per dollar of construction cost.

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