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NTU Urges Congress to Suspend Ethanol Tariff

May 9, 2006

Dear Representative Shadegg:

On behalf of the 350,000 members of the National Taxpayers Union (NTU), I write to offer our support for your legislation, H.R. 5170, the Ethanol Tax Relief Act of 2006. By temporarily suspending the 2.5 percent tariff and 54-cent-per-gallon duty on imported ethanol fuel, this bill could help to address gasoline price instability caused by unwise federal mandates and regulatory policies. Although NTU would warmly welcome a permanent repeal of ethanol import duties and subsidies, temporarily eliminating tariffs is a commendable first step down the road to a fiscally-sensible energy policy.

In response to ongoing price spikes that have been plaguing motorists for much of the last year, some individuals are clamoring for economically-harmful price fixing and higher taxes on energy producers. However, our members understand that eliminating barriers to trade, such as tariffs on imported ethanol, is one of the few options government can take to combat high prices without further distorting our energy market.

As we've said on numerous occasions, tariffs are nothing more than taxes levied on consumers. As damaging as tariffs can be under normal trading conditions, there is really no excuse for maintaining tariffs that only serve to protect domestic ethanol producers when even they admittedly cannot fill existing demand. With MTBE gasoline additive producers pulling out of the market faster than expected for lack of liability protection, we are witnessing a strain on our gasoline supply system. In fact, an estimated 130,000 barrels per day of ethanol are expected to be needed to replace the loss in MBTE volume. Congress should act now to plug this hole with additional imports of ethanol while pursuing more reasonable long-term energy policies.

Misguided federal subsidies toward ethanol production and consumption have plagued taxpayers for years, even as agribusiness giants reaped the profits from their favorable treatment. Although the House voted to ease the pain in 2005 by including MTBE liability protection in its own energy legislation, the conference version of the bill ditched this provision. Lawmakers in both chambers pushed for even more ethanol-use mandates in the final bill, making an already-burdensome policy completely intolerable. For these reasons, Members of Congress now have a special responsibility to do away with protectionist restrictions on imported ethanol.

NTU strongly supports efforts to remove outdated tariffs on ethanol imports, and any votes taken on H.R. 5170 will be included in NTU's annual Rating of Congress.


Kristina Rasmussen
Senior Government Affairs Manager