Just a few days after our previous post outlining the ethanol industry’s brave, unprecedented, legendary, and 100% voluntary decision to give up the ethanol tax credit, we see that there are still other subsidies that they are interested in keeping:
But the head of the Renewable Fuels Association—Bob Dinneen—says the industry will work to ensure that tax credits for cellulosic ethanol will continue past the end of 2012.
“We think that the production tax credit and the depreciation that is now allowed for cellulose needs to continue,” Dinneen says.
Extension of the cellulosic tax credits will send an important signal to the marketplace and encourage investment in the next generation of ethanol technology, Dinneen says.
And to those who consider it just another federal subsidy for ethanol…
“They need only look at the tax incentive for grain-based ethanol that has just expired–that demonstrates you don’t need a tax incentive forever,” Dinneen says.
“You need to encourage investment—convince the marketplace that there is going to be consistent government support that will allow the industry to get on its feet.”
Cellulosic ethanol has not yet been produced commercially, but according to the U.S. Department of Energy web site, several commercial cellulosic plants are under construction.
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With the current partisan fighting over oil subsidies (and energy policy more generally), its worthwhile to look at energy legislation that has found bipartisan support: the New Alternative Transportation to Give Americans Solutions Act of 2011 (the NAT GAS Act, often called the Boone Pickens bill). It currently has 180 cosponsors, split roughly even between Republicans and Democrats. Joe Nocera likes it.
True fiscal/small government conservatives understand the danger of using the tax code to steer the economy. It has brought us ethanol, subsidized home ownership for the wealthy, etc. Populist conservatives-in-name-only don’t actually care about applying consistent principles, or often let their concern be overshadowed by campaign donations.
Which is why I was surprised to see Representative Ron Paul, principled libertarian/free-market extraordinaire, as a cosponsor. I spoke to someone in Ron Paul’s office, and they explained (roughly) that support for tax credits (i.e., industries paying less in income tax relative to the status quo) is consistent with Ron Paul’s support for lower taxes.
This YouTube clip seems to explain Paul’s position (he was asked about a bill to end tax credits for the oil industry):
PAUL: Well, how do you define a subsidy? I don’t consider any tax break as a subsidy. That was not a spending bill, that was not a grant.
…
I never vote to increase any taxes. I vote to always give tax credits, and I always cut spending. I’ve never voted for a real spending bill, so, I don’t think that is in the category of something I’d consider a spending bill.
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