IBD: Defund Ethanol

Energy Policy: A GOP senator and a Democratic congressman want to end the poster child for pork-barrel spending. Unfortunately, the road to the White House runs through the cornfields of Iowa.

It's easy to lampoon federal spending on turtle tunnels, bridges to nowhere or cowboy poetry readings. It is harder to deal with subsidies and tax credits for things that do real damage to our collective bottom line. Case in point: the tax credit for and mandated use of ethanol, the corn-based additive to gasoline that was supposed to save the earth and gasoline and pave the way to energy independence.

It has achieved neither, and Sen. Tom Coburn, R-Okla., is trying to end this mother of all corporate welfare programs. He is joined in the effort by Rep. Ben Cardin, D-Md., and Charles Koch of the famous Koch brothers. He is opposed by just about every presidential contender and conservatives such as Grover Norquist of Americans for Tax Reform.

Norquist says ending the Volumetric Ethanol Excise Tax Credit, which provides a 45-cents-a-gallon tax credit to ethanol producers, without an offsetting tax cut elsewhere, amounts to a tax increase that violates the no-new-taxes pledge he and his group demand from candidates.

Coburn disagrees, and so do we. Ending a tax credit is not a tax increase but rather the elimination of one of many distortions in the tax code that try to pick winners and losers, favoring this industry at the expense of that one. He notes that Citizens Against Government waste supports his position and his amendment to a small-business measure.

Ethanol is protected by a federal mandate that requires the production of 13.95 billion gallons of alternative fuels this year and 36 billion gallons by 2022. Without that mandate and a 54-cent-a-gallon tariff on foreign ethanol from the likes of Brazil, ethanol could not compete in the marketplace. To suggest the tax credit's a good deal for consumers and taxpayers is bogus.

It's the mandated use of ethanol that has imposed a hidden tax on consumers. Coburn points to a CBO report that states: "The increased use of ethanol accounted for about 10% to 15% of the rise in food prices between April 2007 and April 2008. In turn, that increase will boost federal spending for the Supplemental Nutrition Assistance Program (SNAP, formerly known as the Food Stamp program) and child nutrition programs by an estimated $600 million to $900 million in FY 2009."