Has sanity visited the U.S. Senate?
Senate Republicans joined Democrats on Thursday in an overwhelming vote to end an important tax break for the ethanol industry, the first of many niche tax breaks GOP lawmakers are looking to close.
The Senate voted 73-27 to end the 45-cent break refiners receive for each gallon of ethanol they blend with gasoline and to scrap a 54-cent tariff on imported ethanol. The subsidy is worth roughly $6 billion a year to the ethanol industry. The Joint Committee on Taxation estimates ending it by July would save $2.4 billion over the rest of the year.
Sadly, Sen. Dan Coats was one of the 27 voting no. I couldn't find out specificially what Sen. Lugar did, but he has favored replacing the current subsidy with a different one, and several stories mentioned that "corn state" senators voted against the measure. The good news us that this could mean trouble for other niche tax breaks. The bad news is that is far from a done deal. The House hasn't acted, and the White House isn't crazy about alienating corn growers.
It should be noted that conservatives aren't united on the benefits of ending such subsidies. Tea partiers and the Club for Growth support ending them. But Grover Norquist of Americans for Tax Reform considers the eimination of a tax break the same as a tax increase.
UPDATE: Another take on the wider tax implications:
Comments
Not only does the current arrangement put us in the preposterous position of burning our food in our cars (that corn could have made perfectly good whiskey!), but it doesn't even save petroleum. It takes a gallon of petroleum in synthetic fertilizers, distillation and transportation to replace a gallon of petroleum. Furthermore, ethanol gets considerably less mileage than gasoline when burned in a car. Only Brazil, which has more sugar cane than it knows what to do with, has made the system work profitably, so naturally we won't let them import their cheap ethanol.
I never thought that I would ever agree with littlejohn on anything, but he is spot on about ethanol. $2.4 billion in savings and cost avoidance is just the tip of the iceberg. With the law passed to increase ethanol content to 15% of gasoline offered for sale is a backbreaker .
"CBO finds that before they even pay at the pump, taxpayers incur a cost of $1.78 to replace a gallon of gasoline by substituting corn ethanol. This accounts for not only the cost of the Volumetric Ethanol Excise Tax Credit (VEETC) per gallon, but the relative energy content differences between ethanol and gasoline (gasoline contains ~32% more energy than a gallon of ethanol, so 1.48 gallons of ethanol are required to replace one gallon of gasoline), and changes in the consumption of ethanol and gasoline that can be attributed to the tax credit."
President Bush signed a law that requires 40% of our corn harvest must go to ethanol which yields at 67% into ethanol that translates to some 3.3 billion bushels of corn pumped into our fuel tanks. This artificial stimulus is causing excessive soil erosion in the US -- as farmers chase the high priced commodity.
5 Billion bushels of corn went to Ethanol per year, which is a lot. As a person who sells corn, it will depress prices a bit, but with China, Australia, Russia in a draught I think prices will hold steady. The problem if the tax credit is not eliminated is that corn could reach a price that cattle, chickens and pigs would be too expensive to raise resulting in slaughtering herds, short term price reduction, but long term high prices. In simple terms we could choke corn, similar to what happened a couple of years ago.
I favor eliminating the tax credit along with all tax credits: child tax credit, education tax credits, itemized deductions, energy credits, etc. What you do with your money is up to you. You should not be swayed to buy something earlier than you had planned simply because congress wants to artificially stimulate one small sector of the economy.
We need to cut spending by $1.6 Trillion next year and that will be darn difficult. Everything needs to be on the chopping block. We are not that far behind Greece.
Gadfly, it makes my day that we can agree on something where there is really no dispute about the facts.
I suggest we get together and solve that little problem between the Jews and Arabs in Israel.
Corn today, tomorrow a reasonable compromise over Jerusalem!
Cheers! I, for one, am actually putting a corn product to good use this evening.