Senate Vote Against Niche Ethanol Subsidies Gives Perspective to Debate Over Broader Tax Cuts

Ethanol is no longer politically sacrosanct. The U.S. Senate sent that message last week when it voted 73 – 27 to eliminate the 45 cent per gallon tax credit for ethanol refiners.

Not surprisingly, Democratic Leadership is attempting to parlay this vote into momentum to raise taxes on U.S. oil and gas companies. Though at first glance these measures appear to be similar, it’s really like comparing apples to … well, corn.

Ethanol industry receives actual, special subsidies to the tune of $5 billion annually, while Sen. Menendez et al are singling out the oil industry to repeal a tax deduction available to all U.S. industries.

One of the so-called “tax loopholes” under attack for our traditional energy sector isSection 199 — a tax credit designed to encourage domestic employment and made available to all firms operating in America’s manufacturing sector. The only thing special about the oil industry’s relationship to 199 is the fact that it can only utilize a 6 percent credit while all other sectors — from coffee roasters to music producers — can go to 9.

But envision for a moment that Sen. Menendez and the forty-five House Democrats, who are pressing Vice President Joe Biden to single out our oil and gas firms for a tax hike as part of the deficit-cutting deal, got their way. Would this measure fix our fiscal crisis? Not at all.

In fact, calling for the elimination of so-called oil industry “tax breaks” as a means to achieve deficit reduction is completely misleading and will do nothing to reduce our $14 trillion looming debt problem.

So why even bother to focus so much attention on the oil and natural gas industry if it will do nothing to ease our ballooning fiscal programs? Simple: the call-to-action is a smokescreen to deflect attention from entitlement reforms and other politically sensitive issues that are truly exacerbating the federal spending problem. We would like to think lawmakers would spend their time thinking up real solutions to serious problems, but this would entail moving beyond the partisan brinkmanship, something Sen. Menendez and his colleagues appear unprepared to do.

Originally published by the Houston Chronicle on June 20, 2011 at

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