Free Markets, Free People
Ethanol subsidy axed
Or an alternate title: “A good start”.
The Senate voted 73-27 Thursday to kill a major tax break that benefits the ethanol industry, handing a political win to a bipartisan group of lawmakers that call the incentive needless and expensive.
The vote also could have ramifications on future votes to reduce the deficit. Much of the GOP conference supported Feinstein’s bill even though it does not include another tax break to offset the elimination of the ethanol tax credit.
Feinstein’s amendment to an economic development bill would quickly end the credit of 45 cents for each gallon of ethanol that fuel blenders mix into gasoline. The credit led to $5.4 billion in foregone revenue last year, according to the Government Accountability Office.
The amendment also ends the 54-cent per gallon import tariff that protects the domestic ethanol industry.
So we have actual bi-partisan agreement to end a subsidy and cut spending. Good. I’m also pleased with the fact that the tariff would be lifted. This means less market distortion and real signals sent by that market as to whether or not ethanol is a viable product in the energy sector. My guess is it is, however, not to the extent the subsidy made it. It may also have an effect of lowering food prices as less corn production will probably go to ethanol than is now.
As the article points out, the issue is “more regional than partisan”. That’s probably the case with many subsidies. Let’s carry this on by hunting down a few more of those types of subsidies and immediately end them. A few billion here, a few billion there and pretty soon you’re talking big money.