Congress Does Right by Doing Nothing on Ethanol

It seems impossible, but on the eve of the Iowa Caucus the once unstoppable ethanol tax credit expired. After three long decades and over $20 billion dollars spent, the relatively quiet expiration of this once sacred tax credit is surprising considering the pitched battles that took place earlier this year between Grover Norquist and Oklahoma Senator Tom Coburn over its repeal.

The fact that the credit expired on the eve of the Iowa Caucus, long considered the political bulwark against repeal, demonstrates just how far politically the credit has fallen. In fact, a survey found that even among Iowa Republican caucus goers, 57% of them favored Republican candidates calling for outright repeal of the credit.

Although the ethanol tax credit was ostensibly created to promote ethanol as a greener form of fuel, the credit has long been criticized by a wide variety of groups as a wasteful special interest tax break. As Citizens for Tax Justice Director Bob McIntyre once explained, the critical problem with subsidizing ethanol is the product itself takes “more energy to make than it saves” and that even with an exorbitant subsidy of $0.50 for every $1 gallon it was still not very competitive.

For their part, ethanol industry representatives admitted defeat, explaining that the ethanol industry had “evolved” and that now was the “right time for the incentive to expire.”

It is also the right time for scores of other tax credits to expire permanently. The ethanol tax credit is 1 of the 53 such provisions – called “extenders” because Congress quietly extends them every couple of years or so for their favored constituencies – which expired at the end of 2011, most of which are handouts to business interests. In a word, they are pork.

Let’s hope the ethanol subsidy’s death is permanent, and a sign that tax sanity is making a comeback in Congress.

Photo of Ethanol Production via Bread for the World Creative Commons Attribution License 2.0