Ethanol, Congress and tax credits

(Full article can be found at http://deltafarmpress.com/government/ethanol-congress-and-tax-credits)

An economist’s perspective on recent ethanol legislation
David Bennett

On Friday, June 17, the Senate voted 73-27 in favor of eliminating the Volumetric Ethanol Excise Tax Credit (VEETC). The bipartisan vote, which reversed a Senate vote taken just two days prior, would discontinue a 45-cent-per-gallon tax incentive that goes to blenders and refiners when blending ethanol into gasoline….
Shortly after the vote, Delta Farm Press spoke with Chad Hart, Iowa State University assistant professor of economics, about the situation….Hart, who studies and follows the ethanol industry, spoke on the Senate’s breach of tax legislation protocol, the Klobuchar/Thune alternative and how the House might react….
On the reason members of the House are agitated by the Senate’s VEETC vote…

“Traditionally, any bill that deals with taxes starts in the House.

“When the Senate made this move on the VEETC, it was a tax change and should have started in the House. Procedurally, that’s how Congress goes about it and is why the House is in an uproar.”

On what Coburn was trying to accomplish…

“Coburn wanted to put a marker, if you will, in the sand. He wanted to say ‘we’ll have this vote and show there are enough votes in the Senate to eliminate this tax credit, right now.’

“I think he was thinking ‘we’ll get this vote, and we’ll show the House we’re serious. The House will pick it up and vote on it.’

“It’s true this was a symbolic vote. But it was also a strategic vote. It is now established, by a sizeable majority, that there are enough votes in the Senate to completely get rid of the tax credit.”
Our Take:
Yes, the now-passed Coburn/Feinstein amendment is attached to a bill that may never see the light of day, so there’s no immediate impact to VEETC. But the writing is on the wall. As ethanol expert Hart says in the excerpt quoted above, this proves the votes are there in the Senate to chuck the ethanol blender’s credit.

The blatant hypocrisy of Coburn is frankly galling. He and many other congressional leaders would eliminate the $6 billion in support for ethanol while they leave alone more than $25 billion in write-offs, credits and freebies that the oil industry enjoys each year.

We would like to point out the bottom line in this behavior–Coburn and his colleagues are voting against American jobs–corn ethanol supports 76,000 farmers and 400,000 agribusiness-related jobs. And they are voting to increase foreign wealth at the expense of the American consumer who stands to pay more for gasoline with less effective competition from domestically produced ethanol.

We get a very slim portion (and dropping) of our gasoline supply from domestic oil production. We wouldn’t even mind preserving a rational level of oil industry support that helps keep these jobs going, while stripping away such things as credits for foreign taxes paid by big oil. Do we really need to subsidize payments to the Chinese? Does Exxon deserve government support when it makes $10 billion dollars profit (not revenue, but profit!) in a single business quarter?

Coburn and company don’t represent their constituents, but instead toe the line for the greediest, most myopic part of corporate America, which has used the tax code to subsidize the export of good-paying jobs. When will these elected officials, and the companies they represent realize that without a growing middle class and the spending power they command, corporate America is doomed to become a fifth-rate, bargain-price competitor. Remember what people used to think when they saw the label “Made in Japan” on the bottom of a toy or dime-store item a generation ago. Tom Coburn is putting us on the fast track to people around the world thinking the same thing now when they read pick up a product and read the label, “Made in America.”

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