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Mar 09 2011

Senators Coburn, Cardin Introduce Bill to Eliminate Ethanol Subsidy

(WASHINGTON, D.C.) – U.S. Senators Tom Coburn, M.D. (R-OK) and Ben Cardin (D-MD) today introduced a bill to save taxpayers $6 billion by repealing the costly and ineffective Volumetric Ethanol Excise Tax Credit (VEETC) or “blenders tax credit,” which provides .45 cents per gallon to blenders of ethanol. Last week, the Government Accountability Office (GAO) released a report describing the tax credit as “largely unneeded today to ensure demand for domestic ethanol production.”

“The ethanol tax credit is bad economic policy, bad energy policy and bad environmental policy. 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. I’m hopeful my colleagues on both sides of the aisle will take a stand against business-as-usual special interest giveaways and eliminate this wasteful and harmful subsidy,” Dr. Coburn said.

“As our economy begins to grow again, we need to bring our budget under control through a combination of smart cuts and smart investments. Cutting yet another subsidy to big oil that is making big profits is smart policy. Rather than underwriting ethanol subsidies that are causing food prices to skyrocket, we should be supporting American innovation in more sustainable alternative fuels the results of which will help create jobs, lower energy costs and strengthen our national security,” said Senator Cardin.

While there are a wide range of federal incentives available for ethanol production, the VEETC essentially provides free money for blenders who are already mandated by the Renewable Fuels Standard (RFS) to blend ethanol in fuel.

Moreover, while born of good intentions, federal subsidies for ethanol have had less than satisfactory results. Ethanol-blended fuel is nearly a third less efficient than gasoline (ethanol burns at 68 percent the energy content of gasoline), has contributed to the increased price of corn (as well as land, feed, and other input costs), and can cause engine damage in motor vehicles.

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