Extend Tax Credits for Ethanol?

There is currently a $0.45 per gallon tax credit on ethanol – set to expire at the end of next month. The lame duck session is divided on whether to extend the credit or not.

Some claim it is a big government subsidy that distorts markets and hampers free enterprise, others claim it is a needed bridge to support valuable alternative to oil imports, rising energy costs, etc

Senator Grassley, R-Ia, who supports the subsidy pointed out that petroleum subsidies are not being targeted by lawmakers – and essentially dared some to put those on the table too.

“A lot of the opposition comes from big oil and natural gas people and senators from those states,” Grassley said. “I can’t believe they would have the chutzpah to talk about doing away with the tax incentives for ethanol at the same time they expect us to keep in place tax incentives for oil and natural gas.” (http://www.desmoinesregister.com)

A spokesperson for Senator Tom Coburn R-Ok, an opponent of ethanol tax subsidies, said all tax supports should be on the table, but noted that “not all subsidies are created equal”.

Ethanol subsidies cost tax payers $6-8 billion per year according to the CATO Institute in a 2007 report. (http://www.cato.org/pub_display.php?pub_id=7308)