Thursday, June 16, 2011

Ethanol Follies

It's tough being a Senator. You have to figure out how to buy the votes of group A, while simultaneously buying the opposing votes of group B, using monies taken from groups C, D, and E. If you've don your math right, you get re-elected, which is job 1.

Today the Senate voted to end the federal subsidy for Ethanol. Sit down and quit cheering, you haven't heard the whole story.

The fed pays gasoline refiners some $.54/gallon to buy ethanol from Big Corn, which pleases Big Corn. The gasoline refiners, thus, reduce the cost of blended gasoline in proportion to the subsidy, saving you a few cents at the pump for fuel that delivers less power and reduced mileage.

Eliminating the subsidy saves the government money, reducing spending, but wait! The government requires the gasoline refiners to add the ethanol to their product, so without the subsidy you get to pay more for that sub-standard gas you buy. Note that there was no effort to eliminate the requirement for ethanol in gasoline, nor was there proposed a tax cut to help you pay for the suddenly more expensive gas, although there is a glimmer of fairness in this.

Currently the ethanol is paid for from your federal taxes. If this bill passes, the ethanol will be paid for by the end users of the fuel. Since about half the population currently pays no federal taxes, but pretty much everybody buys gas, the penalty falls equally on everybody.

Think of this as step one towards a national flat tax, which would be better if it weren't being imposed over an already progressive tax.

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