Down With Ethanol Subsidies

Ethanol subsidies – they’re all against them. That could make the ethanol industry’s campaign to extend a tax credit vital to the U.S. corn-ethanol business a closer call than it’s been in years.

The tax credit, which is due to expire Dec. 31, cost the government $4 billion in 2008 and could cost $6.75 billion a year by 2015, according to the Government Accountability Office. That has made it a target for conservatives who want to cut federal spending and handouts to private interests. On the left, ethanol’s image as a “green” fuel has taken a hit as environmentalists – including former Vice President Al Gore – have swung to the view that the energy benefits of using corn as fuel are marginal. Some environmentalists and hunger groups complain corn ethanol drives up the cost of food without making a real dent in global greenhouse gas emissions, claims that the ethanol industry has disputed.

In a letter Monday to congressional leaders, MoveOn.org Political Action, FreedomWorks, and more than four dozen groups called on Congress to let the ethanol tax credit expire at the end of the year.

“At a time of spiraling deficits, we do not believe Congress should continue subsidizing gasoline refiners for something that they are already required to do” under federal law, according to the letter, which was also signed by the Sierra Club, the American Conservative Union, and the Grocery Manufacturers Association.

In their letter, Sens. Feinstein and Coburn – joined by 15 other senators in both parties, including Republican Senate Whip Jon Kyl of Arizona – denounce the tax credit as “fiscally indefensible.” The senators also call for dropping the 54-cent-per-gallon tariff on ethanol imports, saying such policies “make our country more dependent on foreign oil.”

A spokeswoman for MoveOn.org confirmed that the joint letter with the other groups marks the first time the group has co-signed a letter with FreedomWorks. A FreedomWorks spokesman couldn’t immediately be reached for comment.

This afternoon, a group that represents ethanol producers fired back at the senators, calling their request “pennywise, but … extraordinarily pound foolish.”

“Eliminating the tax incentive could erase the $3 billion of net revenue for federal tax coffers generated by the domestic ethanol industry in 2009 and put tens of thousands of Americans out of work,” the Renewable Fuels Association said in a written statement. “As nearly 10 percent of Americans are still without work and some 800,000 facing the expiration of unemployment benefits, it is counterproductive to relegate thousands of additional Americans to the same fate.”

source: wsj