House Tax Committee
Snubs Ethanol Breaks

WASHINGTON —(AP)— The tax break for ethanol, a corn-based fuel additive, was dealt a setback Thursday as the House tax panel refused to extend the credit beyond 2000.

But ethanol's defenders quickly made clear the fight is far from over, since the Senate, House Speaker Newt Gingrich and the Clinton administration all support extending the credit through 2007.

Presidential politics also resonates in the dispute, because ethanol is an important pocketbook issue for corn farmers in Iowa, an early caucus state in 2000.

Gingrich, a possible GOP presidential contender, is among ethanol's outspoken supporters, a fact not lost on Iowans.

"He (Gingrich) has been a true friend not only to ethanol, but to farmers in Iowa," Rep. Jim Nussle, R-Iowa, said. "He has been out to Iowa to talk about this and many other issues, and we appreciate that support."

This was one of the many subplots in play when the House Ways and Means Committee by voice vote approved a bill to extend gasoline and transportation taxes through 2003.

The bill is the revenue component of the House's $181 billion transportation bill that includes spending for highways, bridges and safety programs and $37 billion on mass-transit systems through fiscal 2003.

But the House bill would not extend the ethanol tax credit after its expiration in 2000, marking a victory for the House Ways and Means Committee chairman, Rep. Bill Archer, R-Texas, who considers the ethanol credit wasteful and a failure.

Ethanol, a fuel derived from corn and other agricultural products, enjoys a partial exemption from federal gasoline and motor fuel excise taxes. Oil companies that purchase ethanol to blend with gasoline benefit by paying lower gasoline taxes, but ethanol producers and corn farmers benefit as well because the demand drives up prices for their products.

Ethanol, which totaled less than one percent of all transportation fuels consumed in 1995, is commonly blended with gasoline to enhance oxygen content or octane level.

Under government accounting rules, dropping the ethanol credit after 2000 would raise $900 million through 2002 in Archer's bill. Basically, the government assumes higher revenues from gasoline taxes once the ethanol credit ends.