17 Senators call for end to corn ethanol tax credit and tariff

Today, a group of Senators from across the political spectrum sent a letter to Senate leadership calling on their colleagues to let the wasteful corn ethanol tax credit and protectionist import tariff expire at the end of the year. The letter was signed by 17 Senators, including unlikely partners such as Feinstein and Kyl (who led the letter), Boxer and DeMint, and Whitehouse and McCain. The letter is a clear signal to Congressional leadership of this unusual block’s strong and unified opposition to wasting tax dollars on corn ethanol.

This comes on the heels of a letter delivering the same message from a coalition of 58 organizations from across the political spectrum—a coalition that includes groups as ideologically opposed as FreedomWorks and MoveOn, as well as taxpayer advocates, deficit hawks, food companies, hunger and development groups, agricultural industry representatives, religious organizations and enviros.

It’s time for Congress and the President to put principle and protecting the environment ahead of party and politics and let the VEETC and import tariff expire.  With this message being cheered louder and louder from so many corners, surely Obama, Reid and McConnell  will finally put a dagger through the heart of this three decade old giveaway. After all, all they have to do is not proactively extend the tax credit and tariff. 

Calling the multi-billion dollar subsidy—which would result in U.S. taxpayers paying oil companies $31 billion over five years ($ 6 billion next year alone!) to buy and blend 69 billion gallons of corn ethanol they are already required to use under the Renewable Fuels Standard—“fiscally indefensible”, the Senators could not have put it better: “We cannot afford to pay industry for following the law”.

The Senators highlights just how much corn ethanol subsidies cost us and just how little we get in return in terms of additional domestic ethanol production, jobs, or environmental benefits. They point to a nonpartisan study by the Congressional Budget Office and a recent report from Center for Agricultural and Rural Development (CARD) at Iowa State University, which we discussed here and here.

In fact, the CARD study finds that a one-year extension of the corn ethanol tax credit and import tariff will result in just 5.5% more domestic corn ethanol production than what would be produced in the U.S. without the tax credit and just 427 additional direct domestic jobs. (At $6 billion for next year, that’s about $14million per job!)  In light of this, the latest claims from corn ethanol groups like the Renewable Fuels Association that eliminating the VEETC will result in shuttered ethanol plants, ethanol prices dropping off cliffs and massive job losses are exposed for what they are: wild exaggerations from industry lobbyists.

The Senators also point out the irony of allowing oil and gas imports from OPEC countries into the U.S. tariff-free while putting a 54 cents-per-gallon import tariff on ethanol imports from friendly countries like Brazil, India and Australia—9 cents per gallon more than the 45 cents-per-gallon VEETC it is supposed to offset.   

The Senators have it exactly right: the VEETC is redundant and wasteful and amounts to a multibillion dollar per year transfer from taxpayers to Big Oil and Old Corn Ethanol, mature polluting industries that we cannot afford to subsidize. As I pointed out in this article, when you have politicians as diverse as Senator Feinstein and Senators McCain, DeMint and Coburn, and Al Gore, all agreeing that the corn ethanol tax credit is wasteful, bad for our economy, and bad for our environment, it’s time for Congress and the Obama administration to listen and let the VEETC expire at year-end.