Ethanol Vote Signals Change in Tax Policy

For many years, an uneasy detente between corn-belt Senators and their urban, southern, and mountain state colleagues has protected the booming ethanol industry, but there are signs in the vote on Thursday that it is now “open season” on all tax expenditures.

As Nebraska Senator Mike Johanns remarked, after the vote, “I think we’re looking at everything now.” A sentiment echoed by California Senator Diane Feinstein who declared the era of large subsidies “really over.”

What else is on the chopping block? Earlier in June, senior Ways & Means Committee Republican Rep. Devin Nunes said, “it’s universally accepted that most of these credits are going to be gone.” He’s promoting a reverse auction process that could replace the existing set of production tax credits for wind, solar and other advanced energy technologies.

If ethanol subsidies and other renewable energy subsidies are threatened, what about tax benefits for mostly urban constituencies, such as historic preservation tax credits? Will the unravelling of the ethanol detente affect those policies as well?

As budget concerns become increasingly salient and a new group of House and Senate leaders with no allegiance to the old bargains gain in authority, Treasury’s annual list of tax expenditures is looking increasingly like a menu of offsets.

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