RIP Ethanol Tax Credit

After two attempts, Sen Tom Coburn successfully ended the ethanol subsidy this week after 30 years….of course it’s not truly over yet because the Coburn amendment was part of a larger bill that’s passage is uncertain.  What looks pretty certain — even if the ethanol tax credit survives the July 1st cut off the Coburn amendment requires, it will be extremely unlikely that the tax credit would be renewed next year….as in slim or none….and slim is out of town.

The hope for the ethanol industry remains the subsidy to help build the infrastructure for distribution.    The idea for the shift to an emphasis on distribution was lead by Iowa Sen Chuck Grassley, who along with other farm state members, realized the writing was on the wall and that to maintain credibility fighting against big government spending something needed to give and it seems the ethanol tax credit got the short straw….Thune also joined with Minnesota Democrat Senator Klobuchar to continue to give gov’t aide with tax credits for ethanol blender pumps, for small ethanol producers and for cellulosic biofuels along with a safety trigger if gas prices drop too low.   The Thune bill has the support of many in the ethanol industry.

No question the priority of cutting gov’t spending is becoming the new normal….in fact unlike 2008, when most of the GOP presidential contenders in the Iowa supported the ethanol subsidy — now it’s pretty much down to the front runner Romney.

I’m inclined to feel that the plan to work on the distribution network is still worthwhile.  Ethanol has come a long way as an industry, but it’s located in the Midwest when most of the consumers are on the coasts….and transporting ethanol is primarily by truck or train….ethanol needs a dedicated pipeline.  (Construction of a pipeline linking to the Northeast has been under consideration by POET and Magellan Midstream)

If you want to compete with Big Oil — you have to be in the right market place….encouraging development of distribution networks can set up the ultimate show down…..and then let the consumer decide.

Ethanol may be the first tax credit to fall….it just shouldn’t be the last.

RCJ story Coburn

RCJ story Thune Bill

18 Replies to “RIP Ethanol Tax Credit”

  1. MOSES

    Time to go,Thune and No and Johnson want it .If you vote for ethanol thats a subsidy get rid of them all lets see how fiscal you are walk the wal,.Especially Thune.

    1. PNR

      Why were you surprised that Thune & Noem voted for subsidies? The first job of a politician is to get re-elected. While national politicians (i.e., presidential contenders) may find it better to oppose them, they aren’t running nationally. They’re running in South Dakota where the end of those subsidies means less cash in the pockets of their voters – and voters who lose money because of politicians tend to vote for other politicians.

  2. 73*

    If we are going to support ethanol and farm subsidies in SD and farm states then we shouldn’t have a problem with Michigan wanting taxpayers to bailout the auto industry, NY wanting the financial industry bailed out.

    These industries are very important to there regions and our country.

    We either need to give states pet projects and not complain about the money or we need to actually act fiscally responsible and cut excessive spending.

    I don’t think it is responsible to oppose auto bailouts and then advocate for ethanol because one affects your constituents while the other doesn’t.

    I’m for cutting the oil subsidies also. No subsidies.

  3. The Truth

    income tax credits, small business tax credits, oil tax credits, child care deductions, mortgage interest deductions…..they’re all essentially the same thing.

    if we don’t support the ethanol tax credit based on economic principle then these should be next.

    1. PNR

      If it’s ideals you’re talking, I’m for eliminating *ALL* tax credits, deductions, etc. beyond basic living expenses. Everything beyond that should be taxed at a flat rate. Also eliminate corporate taxes all together – tax owners/shareholders at the same flat rate all other income is taxed at (all taxes are really paid by individuals – consumers, owners, employees – “corporate tax” is a fiction). As for the rate, I’ve often said that if 10% is good enough for God, it should be good enough for government.

      But Congress and state legislatures will never give up the power to manipulate behavior inherent in their manipulation of the tax code.

  4. dissident

    Burning diesel fuel to make ethanol is red state folly masquerading as subsidies for Monsanto and Syngenta. Thank the Corps for flushing the chemical toilet into the Gulf where it can only hurt the Mexican and Caribbean economies.

    1. I Wanna Be Elected. . . Alice

      Yes. SO familiar. Like . . . Democrats raise taxes on producers. Lets’ see if we can learn a lesson together Cory. Raise taxes on Ethanol producers an they will likely produce less(ethanol, jobs, income and tax revenue) Hmmm, seems sane enough. Now. . .raise taxes on producers and they will likely produce less(products, jobs, income and tax revenue). Yup, Cory, you just may have arrived.. . .not that we’d expect you to admit it.

  5. 1942

    The elephant and the donkey are both run by the big names and the politicians are the ones who vote as they want. The 3 members of the US Congress are proving they are puppets of the CORP of AMERICA not the voters of SD Land. All 3 will be reelected if they choose to run because the voter is more committed to the party. Most of them get $$$$ from the government so they do not want ot loose it. It is tax credits and outright payments. Again people get what they vote for and it is garbage. Do we really feel sorry or is it what we want.
    I doubt if any committed elephant and donkey lovers will say anything negative against the 3 headless leaders in SD……………

  6. BurningBrule

    While we’re at it how about cutting the incrediible explicit and implicit subsidies that flow to rural telecom companies? This is an absoulte scandal where urbanites are “taxed” via various fees, surcharges and inflated toll charges to “support” rural telecom companies that, actually, don’t need the support!!

  7. Tim VanBerkum

    Back in 2003 I had a chance to talk to Senator Johnson one on one. I asked him how long he thought ethanol would need to be subsidised. He didn’t really have an answer but said “If something requires a perpetual subsidy, then it’s probably not worth having.”
    I did not expect to hear that from him.


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