Thune Saying It’s Still Morning for Ethanol

Given the recently introduced bill, I was hopeful that Senator Thune might be able to see that the ethanol experiment (that is, existing ethanol subsidies/tariffs) is hurting more than it is helping. My hopes have hereby been dashed:

A federal subsidy of 45 cents a gallon for blending ethanol into gasoline and a 54-cent per gallon tariff on imported ethanol will both expire automatically at the end of the year without Congressional action. A bill introduced in April by Charles Grassley, Republican of Iowa, and Kent Conrad, Democrat of North Dakota, would extend the measures until 2015.

“Ethanol has proven its value as a homegrown, renewable fuel and, in light of the hundreds of billions of dollars shipped abroad as a result of foreign oil dependence, ethanol is a relative bargain,” Mr. Grassley said in a statement accompanying the letter.

The letter was signed by 16 senators, including Al Franken, Democrat of Minnesota, and John Thune, Republican of South Dakota.

Presidential chances aside, I believe is time for Thune to consider that cost cutting which might affect one of his favorite things is prudent and necessary. (Not to mention that he might want to consider that if Al Franken is for something, he (Thune) should be considering diligently if wants to be on the same side of the issue.)

Almost no one who has become dependent on given subsidies–or welfare, or any other direct taxpayer-funded monies–wishes to see them go away. And, yes, I understand that Thune was elected in part for his support of ethanol. Perhaps it is time for him to admit, in the face of mounting evidence, that he will no longer support this unnecessary and detrimental program of wealth redistribution and that he will work for the long-term interests of all of his constituents.

2 thoughts on “Thune Saying It’s Still Morning for Ethanol

  1. I like your thread. But, you don’t seem to understand the economic fundamentals here.

    I’d say that a tax credit is a tax credit. By your logic, you suggest that the volumetric ethanol excise tax credit that Sen. Thune supports somehow functions (economically) different than the many other Bush-era tax credits. And, that’ incorrect. If it’s philosophical purity – I’d get it. Then if that’s the case – you can’t be for some income tax credits and against other tax credits. So let all of the tax cuts expire? That clearly doesn’t jive with your tag line.

    If you eliminate a tax credit – you raise taxes. That’s it. Other than the tax credit, what precisely is the federal “subsidy” for ethanol?

    One step beyond, since foreign ethanol receives the same U.S. tax credit that domestic ethanol does, the “tariff” does nothing more than offset the U.S. tax credit. It doesn’t prevent foreign ethanol from coming into the country. We just don’t provide a tax benefit to the foreign product. It’s an offset – not a deterrent.

    Like most issues, Thune has this right.

    I’d like to understand your logic. Thanks.

    1. SKJONSBERG,

      Thank you for the opportunity to explain my position further.

      Most tax credits should not exist–if their purpose is to provide particular benefit for those in one area of business or industry over another. After all, what are most–if not all–tax credits, but government deciding that even though we should all be taxed (hmm, feels like Christmas typing that) some of us should receive special or preferential treatment based on the particular industry in which we are involved, or the particular types of investments we have, etc. Our system of taxation would be much improved (and much more efficient and useful) if we did away with all of the exceptions.

      If removing removing such tax credits as the one for the ethanol industry results in taxes being raised, then yes, it needs to occur. If the ethanol industry is able to live without special assistance, then it should do so. If it cannot, then it should not receive life support from the taxpayers. Government’s role should not be to level the playing field or to ensure that everyone gets to play regardless of marketplace feasibility.

      Regarding foreign ethanol, the math does not add up. We currently provide a $.45 per gallon tax credit for ethanol. At the same time, we have a $.54 per gallon tariff on non-domestic ethanol imports and a 2.5% tax on top of that (http://www.nacsonline.com/NACS/News/Daily/Pages/ND0407105.aspx). That would mean that bringing in foreign ethanol costs about .$15 per gallon more than the ethanol tax credit offset. If that is not a deterrent, I’m not sure what is.

      I respectfully submit that Thune is taking his current position because of political realities in South Dakota and not because of any adherence to economic fundamentals.

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