Letter from Senators Draws Reaction

Ethanol industry says elimination of investment would be costly to the nation.

Published on: Dec 1, 2010

In a letter, Senators Dianne Feinstein, D-Calif., and Jon Kyl, R-Ariz., are urging the expiration of the tax incentive for ethanol use and it has the attention of the Renewable Fuels Association. RFA says that calling for the elimination of investment in domestic ethanol production "may seem pennywise, but is 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.

According to a study by economist John Urbanchuk, domestic ethanol production returned $8.4 billion in taxes to the Federal government, which is $3.4 billion more than the cost of the tax incentive. Additionally, economic activity generated by American ethanol production added more than $7 billion of tax revenue generated for state and local governments. At the same time, the domestic ethanol industry helped support nearly 400,000 jobs and provided more than $16 billion dollars in increased household income.

Addressing the senators concerns, Urbanchuk reported it is important to also factor in the savings represented by reducing America's need for imported oil by 364 million barrels, a $21billion savings. As for the concerns raised about the secondary tariff on imported ethanol, the economist stated that the tariff is neither a burden on imports nor a factor driving America's dependence on imported oil. The tariff simply exists to offset the value of the tax credit, preventing American taxpayers from subsidizing foreign ethanol producers.

Growth Energy CEO Tom Buis says that the Senators' proposal boils down to maintaining the status quo of our addiction to foreign oil, an addiction that he says threatens this nation's national security, economy and environment.