Lapsed Ethanol Tax Credit is a Tax Hike, not a Tax Cut

By Ken
National Corn Growers Association

Reading a study from Iowa State University on the possibility of losing the ethanol tax credit got me thinking, and I have learned I’m not alone in my thoughts. First, there’s this line from the summary: “Taxpayers would save more than $6 billion through elimination of the tax credit, or almost $7.00 per gallon of ethanol produced in excess of mandated amounts.”

First, ignore the fact that ISU does not explain the $7 per gallon adequately in its report. What does it mean to say that taxpayers would save? Which taxpayers? Are we all going to see a tax cut of some sort?

I don’t think so. In fact, the opposite is true. Removing a tax credit is a tax increase on those who used to receive the tax credit – and I’m sure they will pass it along to us consumers.

Perhaps that’s why the preceding sentence says this, as if it’s a good thing:

“Elimination of the tax credit would shift the burden of meeting mandates from taxpayers to blenders and consumers.”

I’ll let another blogger talk about this further while I scratch my head a little. Here’s Jim Lane at Biofuels Digest:

“Ah, note that the change will ‘shift the burden’ from taxpayers to consumers and blenders who are, uh, taxpayers. The study does not say that the cost of producing ethanol, or fossil fuels that replace additional ethanol, will go down. Simply that the burden for producing energy will shift. That’s not quite the same thing as a savings.”

Eliminating these tax credits will give the government more money to spend elsewhere. It’s as simple as that. And removing the ethanol tax credit and the tariff will benefit foreign ethanol over domestic ethanol. That’s why this report was funded by foreign energy interests.

By Ken
National Corn Growers Association

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