Possible VEETC repeal resurfaces in Senate, tariff also targeted

By Kris Bevill | May 03, 2011

As promised, Sen. Tom Coburn, R-Okla., has brought back his proposal to eliminate the Volumetric Ethanol Excise Tax Credit, stating that the program is “bad economic policy, bad energy policy and bad environmental policy.” Coburn had previously proposed an amendment to immediately eliminate VEETC to a pending Senate bill commonly referred to as the Small Business Bill. He pulled the amendment in early April after receiving heavy pushback from ethanol-friendly senators, but vowed to re-introduce the measure at a later time.

The new amendment, co-authored by Sen. Dianne Feinstein, D-Calif., and co-sponsored a bipartisan group of five other senators, is a more comprehensive approach to ethanol subsidy reform, according to his spokesman. As suggested by its title, the Ethanol Subsidy and Tariff Repeal Act would also eliminate the 54-cent per gallon import tariff on ethanol. The amendment proposes repealing both VEETC and the import tariff on July 1.

Coburn and Feinstein stated they believe the two ethanol programs actually increase the price of food and energy and make the United States more reliant upon foreign oil by raising the price of imported ethanol. “Ethanol subsidies and tariffs sap our budget, they’re bad for the environment and they increase our dependence on foreign oil,” Feinstein stated. “It’s time we end subsidies that we cannot afford and tariffs that increase gas prices.”

The ethanol industry agreed some time ago that modifications to VEETC were needed, but has yet to come forth with a unified outline of their plan. Staunch ethanol supporters such as Sen. Chuck Grassley, R-Iowa, have largely been responsible for preventing legislators from considering eliminating the subsidy yet this year. Ethanol industry groups and other supporters argue that ethanol is not the only industry in need of subsidy reform. They say more attention should be focused on eliminating subsidies for the oil industry.

A spokesman for Coburn said that he has long been in favor of comprehensive tax reform that could also address oil subsidies. For now though, his efforts appear to be targeted only on ethanol. His latest attempt has also been filed as an amendment to the Small Business Bill and he said he plans to push for its consideration at the earliest opportunity.