The ethanol tax break — one of the most egregious examples of corporate welfare now on the books — faces a vote this week in Congress.
Many Republicans, however, are hesitant to embrace killing the subsidy because it could be seen as approving a tax increase under the “no new taxes” pledge they signed with a conservative lobbying group.
But this is about simplifying the tax code, not raising taxes. Killing the corporate subsidy would save $6 billion a year. It should be a no-brainer for any senator or representative who is serious about tackling wasteful federal policies.
The move to put this on the table is the work of Sen. Tom Coburn, the Oklahoma Republican who has long been at the forefront of fighting congressional pork. Sen. Coburn used various Senate procedures Thursday to force a vote on the issue this week.
“I’m not for tax increases, but I don’t think this is a tax increase. This is stupidity at its height,” Sen. Coburn told The Washington Post on Friday. “If you vote to give the richest oil companies in this country $3 billion between now and the end of December, then you don’t get it. You are absolutely confused about what the problems are in this country.”
Indeed, the ethanol credit is the poster child for how politicians view the tax code as a tool for social engineering. Passed off as a means to wean the country from foreign oil, it’s largely just a giant handout to Midwestern farmers and corporate interests. It also drives up the cost of some commodities by encouraging farmers to produce more corn for fuel rather than for human or animal consumption.
“One of my least favorite tax credits is the ethanol production credit,” notes Christopher Bergin, president and publisher of Tax Analysts. “In addition to taking care of the farmers and ethanol producers, the credit drives up the price of feed, which drives up the price of pigs, which drives up the price of bacon.”
In addition, federal ethanol policy has been shown in many studies to be environmentally dubious, given that ethanol creation uses more energy than the ethanol itself provides.
This is a prime opportunity for congressional Republicans — including Sen. Dean Heller and Rep. Joe Heck — to show they won’t tolerate handouts to major conglomerates, and to force Democrats to jump on board. Yes, the tax code should be thinned to remove many other unproductive subsidies — but Congress has to start somewhere.
The ethanol boondoggle would be as good a place as any.