Senators Introduce Bill to Eliminate Ethanol Tax Credit

A bipartisan pair of senators introduced a bill Wednesday that would repeal the Volumetric Ethanol Excise Tax Credit, saying it would save taxpayers $6 billion.

Sen. Tom Coburn, R-Okla., and Ben Cardin, D-Md., introduced the bill to repeal the VEETC, or “blenders tax credit,” which provides 45 cents a gallon to blenders of ethanol. Last week, the Government Accountability Office 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,” Coburn said in a statement. “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.”

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 to blend ethanol in fuel, the senators claimed. 

Moreover, while born of good intentions, federal subsidies for ethanol have had less than satisfactory results, the senators contend. 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.

“As our economy begins to grow again, we need to bring our budget under control through a combination of smart cuts and smart investments,” said Cardin. “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.”

The leaders of several environmental organizations have come out in support of repealing the tax credit, including Friends of the Earth, the Sierra Club and the National Wildlife Federation, signing a letter along with other groups on the left and right. “We applaud Senators Cardin and Coburn for their bipartisan leadership toward saving billions in taxpayer dollars," said Kate McMahon, biofuels campaign coordinator at Friends of the Earth, in a statement. "It is encouraging to see lawmakers putting aside partisan politics and reaching across the aisle to end corporate welfare to profitable dirty energy companies, especially during this economically perilous time.”

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