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Ethanol's Returned $5 for Every $1 in Tax Credit

The federal investment in ethanol over the past three decades has yielded billions of dollars of economic gain, according to a report from economic consulting firm LECG, LLC.

The report concluded that each dollar invested in America's ethanol industry in the form of the federal excise tax credit returned nearly $5 to federal, state and local government and the economy as a whole. The tax provision has not only increased federal tax revenues, but also reduced imported oil expenditures and put more money into consumer pockets. The analysis was conducted by LECG Director John Urbanchuk.

"This is yet another piece of proven evidence for the positive impact ethanol is making on our economy," says Bill Chase, president of the South Dakota Corn Growers Association, in a statement released by the group.

Among the findings:

The ethanol industry has paid for itself since the inception of the excise tax credit. An estimated $33.4 billion in tax revenue for the Federal government and nearly $17 billion of additional tax revenue for State and Local governments has been generated since 1978. The estimated cost of the ethanol tax credit over this same period was $30.4 billion. Consequently, the ethanol industry generated a surplus of about $3 billion for the Federal treasury alone over the past three decades.

The excise tax credit also has saved taxpayers money by reducing farm program outlays through higher prices for corn. Recent research published at Iowa State University estimated that the Federal government saved $3.45 billion in 2007 alone because it was not making loan deficiency payments, as it was in 2005 and 2006.

"The federal investment in America's ethanol industry has been and will continue paying dividends for the American economy," Urbanchuk says. "The federal tax incentive has spurred the kind of investment in rural America that has not been seen perhaps since the New Deal. The resulting benefits of this investment have yielded billions of dollars in new tax revenue, created hundreds of thousands of jobs, reduced America's oil dependence by billions of barrels, and helped keep nearly $100 billion here at home rather than being spent for oil overseas. Economically, this incentive has been an unequivocal success."

To read the report, click here.  

Source: SD Corn Growers Association

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