August 22, 2014

Good News in Vote to Cut Ethanol Subsidy

  • The federal budget is an expression of our country's values. Where we choose to spend and at what levels, how and who we tax, and the borrowing we...

In an encouraging vote last week, a bipartisan Senate majority approved a repeal of the ethanol tax credit. Although the repeal is not expected to become law, the 73-27 vote raised the possibility of further bipartisan agreement on the elimination of such “tax expenditures” to reduce federal deficits.

Tax expenditures are government subsidies that increase the deficit, but they tend to receive far less public attention and congressional scrutiny.

Yeas and nays on the ethanol subsidy were nearly evenly divided among Democrats and Republicans. Why would reducing a tax expenditure receive such broad support? Because it raises revenue without increasing marginal tax rates (so Republicans can support it) and it cuts spending without eroding programs that favor lower-income households (so Democrats can accept it).

That’s why the President’s fiscal commission -- and many other bipartisan groups -- have recommended reducing tax expenditures to help achieve fiscal sustainability.