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NTU to Congress: Ethanol Policy "RIPE" for Change
May 19, 2008
The Honorable Jeff Flake
Dear Representative Flake:
On behalf of the 362,000 members of the National Taxpayers Union, I write in strong support of your "Remove Incentives to Produce Ethanol (RIPE) Act," H.R. 5911. This bill would eliminate most government tampering with the ethanol market. Clearing away the current thicket of mandates, subsidies, and tariffs would lower energy and food costs worldwide while also reducing burdens on the American taxpayer.
In recent months, food prices across the globe have risen sharply, leading to riots and starvation in some of the world's poorest countries. In addition, many American families have struggled under the weight of higher grocery bills. According to some studies, as much as 20 percent of these food price spikes are attributable to corn-based ethanol and the related policies that have propped up its market.
H.R. 5911 would start by repealing the federal mandate that requires the use of 11 billion gallons of renewable fuels next year alone. This ill-advised policy creates an artificial "demand" for ethanol, whether it's economically viable or not. Diversions of the corn crop from food to energy use have contributed to higher food prices. Eliminating the mandate would help bring the corn markets back into equilibrium.
The bill would also end the substantial 51-cent-per-gallon credit for the production of corn-based ethanol. This subsidy has caused a mass exodus of corn farming operations from the traditional food markets to ethanol production, further distorting prices. In addition, it represents a substantial cost to taxpayers, amounting to more than $2 billion per year.
Finally, and perhaps most importantly, the "RIPE Act" would eliminate the tariff on imported ethanol. This tariff prevents the importation of lower-cost ethanol from countries like Brazil, which produces it using sugar instead of corn. Repealing the tariff would support the principle of free trade and would open up the domestic market to more ethanol alternatives.
NTU supports H.R. 5911 as part of an overhaul of energy policy to apply consistent, low taxes to all energy sources without subsidizing favored industries. Credits are not an ideal way of structuring a tax system. Nonetheless, NTU recognizes the principle that their repeal should not serve to grow government. Accordingly, NTU would welcome and encourage efforts to offset the additional revenue that would flow to the federal government as a result of this bill's passage. We look forward to working with you to pass this important piece of legislation.