How to Save Taxpayers $6 Billion a Year
This month, I introduced legislation with Senator Dianne Feinstein that would repeal the 45-cent-per gallon subsidy for corn ethanol blenders, saving the nation approximately $6 billion a year. The bill also lowers the tariff on imported ethanol to match the 45-cent-per gallon subsidy that will remain in place for non-corn, second generation “advanced biofuels.” Today, Senator Feinstein and I also introduced this legislation as an amendment to the Small Business Innovation Research bill that is currently being considered on the Senate floor.
Eliminating or reducing ethanol subsidies and trade barriers will help decrease the federal budget deficit, benefit the environment, and lessen our reliance on imported oil. Historically our government has helped a product compete in one of three ways: subsidize it, protect it from competition, or require its use. Ethanol may be the only product receiving all three forms of support from the U.S. government at this time.
I have long been concerned about the negative effects of ethanol protections in the United States on other sectors of the economy. In November 2010, I signed a bipartisan letter with 16 other Senators that called for an end to ethanol subsidies and tariffs. I also partnered with Senators Feinstein and Shaheen in December on an amendment to tax legislation that would redirect funding from ineffective ethanol subsidies and tariffs toward advanced energy technologies and U.S. deficit reduction.
Here is some background on ethanol subsidies:
- The ‘Energy Independence and Security Act’ requires that 13.95 billion gallons of ethanol be blended into gasoline in 2011 under the Renewable Fuels Standard. Most of this blending is performed by large oil companies.
- Ethanol blenders are also subsidized for complying with the Renewable Fuels Standard. They claim a 45-cent-per-gallon tax credit for every gallon of ethanol they use, which has cost U.S. taxpayers more than $20 billion since 2006. Repealing the corn ethanol subsidy would save taxpayers approximately $3 billion in just six months.
- Repealing subsidies for the corn industry does not require repealing incentives for next generation “advanced biofuels,” which are not produced from corn and reduce greenhouse gas pollution more than 50 percent when compared to gasoline.
- Reducing import tariffs will serve to reduce U.S. dependence on foreign oil. Current tariffs are higher than the ethanol subsidy they supposedly offset. This lack of parity puts imported ethanol at a competitive disadvantage against imported oil, which discourages ethanol imports from Brazil, Australia, and India. It also encourages oil imports from OPEC countries that enter the U.S. tariff-free.