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Politics : Actual left/right wing discussion -- Ignore unavailable to you. Want to Upgrade?

To: Ish who wrote (2387)	10/5/2006 9:38:41 PM
From: TimF	Respond to of 10087

I looked in to it a bit more. This site claims its an income tax credit. The link is a bit out of date, the credit is slightly lower but it still exists (it didn't expire in 2000). "First, the federal subsidy is a blender's tax credit of $0.54 per gallon of ethanol. Under current law, it is scheduled to expire at the end of the year 2000. The subsidy is not paid directly to those who produce the ethanol. Rather, it accrues to the business or company that blends ethanol with gasoline to form gasohol (10 percent ethanol and 90 percent unleaded gasoline). For example, each gallon of ethanol blended with gasoline by a petroleum distributor or retailer results in a $0.54 income tax credit from the tax owed to the federal government. If that company has an income tax obligation, the credit can benefit them directly. If they have no income tax obligation that year, the $0.54 per gallon credit cannot be used and is of no benefit." ssu.missouri.edu So the subsidy or credit has nothing to do with not taxing the product. Its an income tax credit given for adding ethanol in to gasoline. If there is any benefit given in terms of not having the ethanol portion of the blend subject to regular gasoline taxes, then that is an additional advantage given to ethanol by the government. Edit - Oddly just as a site supporting the credit argues against your specific point, a site opposed to the credit supports your contention. "There's a 52 cent/gallon federal subsidy for ethanol used in gasohol (5.2 cents/gallon tax charged to 100% gasoline but not 90% gasoline/10% ethanol)" ergosphere.blogspot.com I don't consider income tax credits to technically be subsidies but their effect is the same. The government is giving advantages to some people and disadvantages to others. I'm generally opposed to targeted tax breaks. Its better to lower taxes (by a lesser amount) for everyone. On top of that federal tax credit some states have direct subsidies. valleynewsonline.com

To: Ish who wrote (2387)	10/5/2006 9:45:47 PM
From: TimF	Respond to of 10087

This site gets more specific. How the Ethanol Subsidy works The "blender" buys gasoline and ethanol at their "rack" (wholesale) prices and blends them. The blender then gets the 51¢ credit for each gallon of ethanol purchased. Hence, if the wholesale price of ethanol is $3.51 and the bender gets a $0.51 subsidy, the blender figures the ethanol really costs only $3.00. So we save $0.51 because the blender passes on a lower price of ethanol, but we have to pay the $0.51 subsidy in our taxes, so it's just the same as if the ethanol really did cost $3.51 and there were no subsisdy. The subsidy for ethanol production is $0.51/gallon, plus a small-producers credit of $0.10/gallon for producers of up to 60 million gallons per year (up from 30 with new energy bill). This is reported in the CRS Issue Brief for Congress, IB10041, Energy Tax Policy, June 17, 2005, page 14. The total subsidy per year is estimated at $1.49 billion for FY2005 and rising. To be conservative, I have ignored the small-producer credit. That does add to the cost. What is the Excise-Tax Bias Against Ethanol? Ethanol is charged the same tax per gallon as gas. It should be the same tax per energy, 1/3 less. For example, if ethanol had half the energy per gallon of gasoline but was more than twice as cheap per gallon, you would have to pay twice as much tax to drive the same distance with ethanol as with gas. That's unfair. Some states, like Hawaii, give ethanol the appropriate tax break, and some, like South Dakota, overdo it. The federal government and most states give no tax break. To be cautious, I assume no states give ethanol any tax break. The federal tax is 18.4¢ and the states average 21¢/gallon. The appropriate tax on ethanol, given this rate on gasoline, is: Fair ethanol tax = 39.4/1.48432 = 26.5¢/gallon, because gas has 1.48 times more energy. The bias against ethanol is 12.9¢/gallon, ignoring all state tax breaks for ethanol. How Big Is the Corn Subsidy? Total corn subsidies for 1995--2003 were $37,360,151,705. Total US corn production 1995--2003 = 83,696,000,000 bushels. 1995--97 in Feed Outlook, 10.14.98 1998--2003 in Corn Supply and Use Average subsidy = $0.4464 / per bushel. The USDA tells us the conversion rate of corn to ethanol is 2.5 gallon per bushel. So, the Average subsidy = $0.1786 / gallon of ethanol produced. zfacts.com ----------------------------- If the above is correct than there is no actual reduction of the retail gasoline tax. It is indeed a subsidy to the blender, or at least some sort of tax credit or rebate against the income of the blender. And there is an effective subsidy of an additional 18 cents per gallong through the agricultural subsidy programs for corn. OTOH it makes an interesting argument that since ethanol has less energy density than gasoline that the retail sales tax on its should be reduced by about a third.