Tuesday, 14 June 2011


“Marketplace” confuses taxes, expense deductions, and subsidies

Not deliberately, I’m sure.

First we start with an inaccurate headline:

Congressional vote could end ethanol tax
Erm... no. Read your own first paragraph:
STEVE CHIOTAKIS: Meanwhile, tomorrow in the Senate, there'll likely be a vote on whether to end federal ethanol subsidies.
(Well, subsidies are just like taxes, right?  The money comes in, the money goes out, the music goes round‘n’round, yo-oh-oh-oh...)
The 45 cent a gallon tax credit for ethanol, the blended mixture of gasoline and corn, cost the federal government nearly $5.5 billion last year.  And the sponsor of the ethanol-scrapping amendment,
Quibble: Not "scrapping” ethanol, just the subsidy.

But we get the idea.  Onward!
...Oklahoma Republican Senator Tom Coburn, says that money is needed to help balance the budget.  But some conservative groups such as Americans for Tax Reform, headed by Grover Norquist, say ending the subsidies is like raising taxes.
Oh, come on.  This is totally disingenuous! The ATR wants to maintain subsidies?  Right!  Here’s what they actually have to say about ethanol:
...ATR is pleased to support Senator Jim DeMint’s amendment which ... fills in the gaps left by Senator Tom Coburn’s ethanol amendment...

The government’s mandate of ethanol usage distorts energy markets and raises prices for consumers.  In order to fully repeal the government’s unfair, anti-free market support of ethanol, all three policies must be eliminated—the mandate, the tax credit, and the tariff.  Only the combination of the Coburn and DeMint amendments completely kills the government’s support of the ethanol regime.

The DeMint amendment... insures that repealing the ethanol tax credit is done in a way that prevents additional money from flowing to the appropriations committees.  ATR has always opposed all forms of government support of ethanol.  Our goal has been to repeal the ethanol tax credit, tariffs and the mandate totally…without raising taxes.  The Coburn amendment, combined with the DeMint Amendment, accomplishes this longstanding goal.
Unpacking the verbiage, what the ATR seems to be worried about is any reduction in subsidy that is made without a corresponding tax cut.  But while ending subsidies alone may be "like” increasing taxes[1], that doesn’t mean that ATR opposes ending subsidies.  To imply such is to tell less than the whole truth.[2]

Now, back to our program:
Senator Coburn is with us on the phone to talk about the legislation. Good morning sir.

TOM COBURN: Good morning.

CHIOTAKIS: Why end the ethanol subsidy?

COBURN: Well first of all, we can’t afford it -- number one.  For the $6 billion that we will have paid out this year, we will have borrowed $2.5 billion from the Chinese to pay it.  Number two is we’re subsidizing the blending of ethanol.  We have a federal law that mandates they have to blend it anyway.  And oh by the way, they don
t want the money.  We have a letter from all the blenders saying, "We don’t need this money.”

CHIOTAKIS: So what’s been keeping the subsidy in place then?

COBURN: The farm belt legislators.

CHIOTAKIS: And this is all a political game do you think?

COBURN: Well, I don't know it's a political game.  You know, 40 percent of our corn is going to be used to make ethanol this year and yet, the price of food is skyrocketing.  And so we've created a false demand for this.  What we really need to do is utilize our own resources and [while] I’m not against ethanol, I just don't think we ought to necessarily incentivize it with our tax dollars.

CHIOTAKIS: And speaking of incentives, though, what about the subsidies that go to oil and gas producers as well.
"Subsidies” like allowed deductions for business expenses?  Exactly alike, right?  The money comes in, the money goes out, the music goes round‘n’round, yo-oh-oh-oh... and when the music stops, those eeevil corporations wind up with more than they deserve. No difference whatever!
COBURN: I think that's a legitimate point to raise, but there is no actual subsidy.
(See, he gets it.)
What there is tax expenditures that are not tax credits.
(Hold on, Senator, you’re borrowing Democrat rhetoric. And you shouldn’t. Repeat after me: "Letting taxpayers keep their own money is not an expenditure.” Once more: "Letting taxpayers keep their own money is not an expenditure.” Got it? Okay, now go and sin no more...)
We certainly shouldn’t subsidize with direct tax payer money to cause somebody to do something.  We don’t do that at all in the oil and gas industry.

CHIOTAKIS: Would you be in favor of re-looking at some of those oil and gas --

COBURN: What I want to do is look at the whole tax code because what we
ve done is we’ve misdirected capital in the tax code. And if in fact we change those things, what we'll see is we can lower tax rates and actually get more revenue for the federal government.

CHIOTAKIS: What about the critics who say, and by critics I’m talking about obviously Grover Norquist, saying the end of the ethanol subsidy is akin to a tax increase.
Ridiculous!  Even The Huffington Post managed to report Norquist’s position accurately, and that was back on March 29th!  What’s your problem?
COBURN: I don’t think anybody in America is going to believe that.  When we go borrow money to pay the largest oil companies in the country to blend ethanol into gasoline, that’s just not spending money that we could save.  And so I don’t think it has anything to do with being a tax increase.

CHIOTAKIS: Senator Tom Coburn from Oklahoma, Senator thank you.

COBURN: You're welcome.

[1]  This curious language doesn’t help with understanding ATR’s position; even The Economist got confused:  See this post and its updates.

[2]  The New Republic’s Jonathan Chait offers an interesting take - just ignore all the "tax cuts for the rich” rhetoric - on the politics in motion here, specifically the interaction between Coburn and Norquist.  (HT: The Mello Guy)

Posted by: Old Grouch in Rants at 00:39:17 GMT | Comments (1) | Add Comment
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1 Kill them all.  God will know his own.

Posted by: Nathan at 06/14/11 13:12:18 (cBrDo)

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