US Senators Tom Coburn and Dianne Feinstein have introduced the Ethanol Subsidy and Tariff Repeal Act, which will fully eliminate the Volumetric Ethanol Excise Tax Credit (VEETC) and fully repeal the import tariff on foreign ethanol.
Cosponsors also include Senators Ben Cardin, Richard Bur, Jim Webb, Susan Collins, and James Risch.
“The ethanol subsidy and tariff is bad economic policy, bad energy policy and bad environmental policy. As our nation faces a crushing debt burden, rising gas prices and the prospect of serious inflation, continuing our parochial ethanol policy that increases the cost of energy and food is irresponsible. I’m pleased to introduce this common sense bill with Senator Feinstein and will push for its consideration at the earliest opportunity,” Dr Coburn said, noting that the bill has been filed as an amendment (#309) to the small business bill pending in the Senate.
“Ethanol is the only industry that benefits from a triple crown of government intervention: its use is mandated by law, it is protected by tariffs, and companies are paid by the federal government to use it. Ethanol subsidies and tariffs sap our budget, they’re bad for the environment, and they increase our dependence on foreign oil. It’s time we end subsidies that we cannot afford and tariffs that increase gas prices,” Sen. Feinstein said.
The VEETC is a de facto cash subsidy that directs 45 cents to refiners for every gallon of ethanol they blend with gasoline. The VEETC costs taxpayers approximately $6 billion a year.
If the VEETC subsidy is repealed by July 1, 2011, as the Coburn/Feinstein bill calls for, it will save approximately $3 billion this year.
Nearly 40 organisations on the left and right, including the refiners who benefit from the VEETC subsidy, have called for the elimination of the subsidy.
The ethanol tariff is comprised of a .54 cent Most Favored Nation duty and a 2.5 per cent ad valorem tax. The ethanol tariff makes our nation more dependent on foreign oil by increasing the price of imported ethanol.
The Center for Agricultural and Rural Development at Iowa State University recently estimated that a one-year extension of the ethanol subsidy and tariff would lead to only 427 additional direct domestic jobs at a cost of almost $6 billion, or roughly $14 million of taxpayer money per job.
The American Meat Institute joined a diverse group of almost 50 associations in sending a letter to Senators Coburn and Feinstein supporting the measure.
“Conventional ethanol is due to receive some $6 billion in taxpayer funds this year,” the groups wrote. “Continuing to subsidize oil companies to blend ethanol – which they are already required to do by the Renewable Fuels Standard – is wasteful and unnecessary. The Ethanol Subsidy and Tariff Repeal Act will save U.S. taxpayers several billion dollars this year and have almost no impact on ethanol production, jobs or prices.”
AMI President and CEO J. Patrick Boyle issued the following statement in response to the introduction of the legislation: “I commend Senators Coburn and Feinstein for their leadership on this important issue. At a time of record federal deficits coupled with rising food prices, it is time to end the 30 years of taxpayer subsidies afforded to the corn-based ethanol industry, which is costing taxpayers approximately $6 billion this year alone. By eliminating the Volumetric Ethanol Excise Tax Credit and the import tariff, this bill would be a tremendous first step in eliminating unnecessary federal support for corn ethanol. It is time the corn ethanol industry operates on a level playing field with other commodities that rely on corn as their major input. AMI strongly supports this bill and encourages its swift passage in the Senate.”
In a separate measure on Tuesday, AMI joined livestock and poultry groups, including National Cattlemen’s Beef Association, National Chicken Council, National Meat Association, National Pork Producers Council and National Turkey Federation, in urging key Senate budget negotiators to eliminate the VEETC in an effort to save taxpayers more than $6 billion per year.
“Not only would saving the U.S. Treasury $6 billion in lost revenue be a prudent budgetary decision, such action would also be a good and strong signal that it is now time for the 30-year old ethanol industry to begin to compete in the marketplace without the aid of government subsidies,” the groups wrote in a letter to a bipartisan group of senators known as the "gang of six,” who are currently working to craft a budget resolution for Fiscal Year 2012 and beyond. The "gang of six" includes Senators Saxby Chambliss (R-GA); Mike Crapo (R-ID); Tom Coburn (R-OK); Richard Durbin (D-IL); Kent Conrad (D-ND); and Mark Warner (R-VA).
