Grassley, ethanol industry, push bill to save, but cut, ethanol subsidies 

It's pretty clear someone in the ethanol industry has done some polling and whip counts on Tom Coburn's bill to eliminate the ethanol tax credit. The ethanol industry and it's congressional patrons, led by Iowa Republican Chuck Grassley, have proposed a bill to slash the federal tax credit for blending ethanol in with gasoline.

The Des Moines Register explains:

The bill, introduced Wednesday by Sen. Chuck Grassley, R-Ia., is a bid by the industry to retain some government support but at a lower cost that will have a better chance of keeping congressional support. The bill combines elements sought by different industry trade groups. The industry's political support has been slipping amid skyrocketing prices for corn and rising food costs.

 The 45-cent-per-gallon tax credit that goes to refiners that blend ethanol with gasoline is scheduled to expire at the end of this year.

 Grassley's proposal would cut the credit to 20 cents in 2012 and then to 15 cents in 2013. From 2014 through 2016, the credit could be as high as 30 cents if the price of oil is $50 a barrel or below but would fall as crude prices rise. At $80 oil, the ethanol credit would drop to 6 cents and would disappear when oil reaches $90. As of late, oil prices have been running well over $100. The subsidy would expire after 2016.

Of course, the biggest ethanol subsidies are the ethanol mandate and the many ways governments subsidize and incentivize driving.

 

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Timothy P. Carney

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