Federal Tax Credit for Ethanol Expires

WASHINGTON, D.C. -- The federal tax credit for ethanol expired on Dec. 31, ending more than 30 years of incentivizing the fuel made of mixed gasoline and ethanol. The credit cost the government almost $6 billion in 2011, according to a New York Times report.

Both Republican and Democratic legislators played a part in ending the credit, an action which ethanol proponents accepted without a major fight due to the maturing of the industry, as CSNews Online previously reported. "We may be the only industry in U.S. history that voluntarily let a subsidy expire," said Matthew A. Hartwig, spokesman for the Renewable Fuels Association trade group. "The marketplace has evolved. The tax incentive is less necessary now than it was just two years ago. Ethanol is 10 percent of the nation's gasoline supply."

Rep. Jeff Flake (R-Ariz.) commented, "With record deficits and a ballooning national debt, it was ludicrous to expect taxpayers to pay billions to prop up a mature industry that should be able to fend for itself.” Although the tax credit expired with the advent of 2012, the requirement to use increasing amounts of ethanol in gasoline remains. Meanwhile, ethanol companies and gas station retailers are supporting the potential expansion of a federal program that helps pay for pumps and other equipment that’s required to dispense fuel with higher ethanol concentrations, according to the report.

Legislators such as Sen. John McCain (R-Ariz.) have objected to such increased spending. "Not content with government support to subsidize ethanol, protect it from competition or require its use, lobbyists now want taxpayers to pay for the construction of pumps and holding tanks at retail gas stations," he said.

However, Hartwig labeled such a move as "a wise investment for the government" that would help meet expected demand for higher ethanol blends. According to Congress' Government Accountability Office, higher corn prices have resulted from the increased demand for corn to be used in ethanol production.