Ethanol Tax Credit Ends

A federal tax credit for ethanol expired in 2011, marking the end of an era in which the federal government provided more than $20 billion in subsidies for use of the product. The tax break, created more than 30 years ago, had long seemed untouchable. But in the last year, during which Congress was preoccupied with deficits and debt, it became a symbol of corporate welfare. Fiscal conservatives joined liberal environmentalists to kill it, with help from a diverse coalition of outside groups.

Nearly 40% of the U.S. corn crop goes to ethanol and by-products, including animal feed. The Government Accountability Office (GAO), an investigative arm of Congress notes that the increasing demand for corn for ethanol production has contributed to higher corn prices. The higher prices have created additional income for corn producers, but also appear to have increased costs to meat and poultry producers, big food companies, grocery shoppers and federal food programs, the GAO said.

The tax credit, which cost the government nearly $6 billion in 2011, went to gasoline refiners that mixed ethanol with gasoline. The government has promoted ethanol and other biofuels as a way to reduce dependence on imported oil. Pump prices jumped as much as 30 cents per gallon as the credit expired.