Industry recycles discredited claims but bipartisan consensus on ending corn ethanol subsidies grows
It seems like every day the bipartisan consensus on the need to end corn ethanol subsidies grows. A day after a coalition of 58 organizations from across the political spectrum, delivered a jointly signed letter to Congressional leadership signaling their strong opposition to any extension of the Volumetric Ethanol Excise Tax Credit or “VEETC”—the $6 billion-per-year tax corn ethanol tax credit to expire at year-end—a group of 17 Senators, led by Senators Feinstein and Kyl and similarly notable for its political diversity, delivered their own letter to Senate Majority Leader Reid and Minority Leader McConnell making clear their conclusion that it was time for Congress to end the wasteful corn ethanol subsidy and protectionist ethanol import tariff.
Not surprisingly, the Renewable Fuels Association (RFA), a top corn ethanol industry lobby, quickly issued this statement challenging the conclusions reached in the letter and again offering up a redux of its chief economist John Urbanchuk’s tired and long discredited claims—namely that the domestic corn ethanol industry adds billions to federal tax coffers and creates hundreds of thousands of jobs, all thanks to the VEETC, and that the ethanol import tariff is simply meant to offset the value of the tax credit.
As we pointed out here way back in April, RFA’s job creation claims are so wildly inflated, it’s hard to understand why they continue to recycle them when it’s clear that lawmakers on both sides of the aisle are simply not buying it. Instead, they are basing their conclusions on analysis done by the non-partisan Congressional Budget Office and academic studies such as this analysis by the Center for Agricultural and Rural Development (CARD) at Iowa State University, which found that an extension of the $6 billion per year VEETC will drive little domestic ethanol production above and beyond what is already required by the Renewable Fuels Standard and result in just a few hundred new direct jobs.
And, as the Senators point out in their letter, the import tariff is $0.09 cents per gallon higher than the ethanol subsidy it supposedly offsets, discouraging imports of better-performing ethanol from friendly countries like Brazil, India and Australia, while we continue to allow in OPEC oil tariff-free.
Equally shocking is just how much of the clean energy tax incentives U.S. taxpayers support each year are eaten up by corn ethanol. Despite being a mature, mainstream and polluting industry, corn ethanol receives a whopping 70% of all the federal tax incentives for renewables. That’s right. Of the $7 billion in clean energy tax incentives expiring at the end of the year—including incentives for renewable electricity sources like solar and wind—corn ethanol receives $5 billion.
Despite RFA’s last ditch efforts to push for an extension of the wasteful and redundant VEETC, the facts are so clear and overwhelming that Senators as unlikely to agree as Feinstein, Kyl, Boxer, and Demint have all arrived at the same conclusion: the corn ethanol subsidy and ethanol import tariff are “fiscally irresponsible and environmentally unwise, and their extension would make our country more dependent on foreign oil”. Now it’s time for other members of Congress to heed the strong and unified call from their peers and let the VEETC and ethanol import tariff expire at year-end.