May 3, 2011 / 11:12 PM / 9 years ago

Senators seek to end ethanol subsidy, tariff

WASHINGTON (Reuters) - A bipartisan group of senators on Tuesday introduced a bill to end the U.S. subsidy for ethanol producers and the tariff on ethanol imports, saying the government can no longer afford to pay the benefits.

The government provides 45 cents to refiners for every gallon of ethanol they blend with gasoline, costing taxpayers $6 billion a year. Ethanol imports are hit with 54-cent-per-gallon tariff and a 2.5 percent ad valorem tax.

Both the producer subsidy and import tariff are set to expire at the end of this year.

“As our nation faces a crushing debt burden, rising gas prices and the prospect of serious inflation, continuing our parochial ethanol policy that increases the cost of energy and food is irresponsible,” said Republican Tom Coburn, who co-introduced the bill that has seven co-sponsors.

Opponents argue the ethanol tariff makes the United States more dependent on foreign oil suppliers by raising the price of imported ethanol.

“It’s time we end subsidies that we cannot afford and tariffs that increase gas prices,” said Senator Dianne Feinstein.

U.S. ethanol makers are working on reforms to replace the tax break, as the industry realizes lawmakers will likely cut back the subsidy and import tariff to help fight the federal budget deficit.

Democrats in the Senate may also soon introduce legislation that would strip billions of dollars in tax breaks for Big Oil companies. Senate Leader Harry Reid said on Tuesday that an announcement on that would come on Wednesday.

Reporting by Tom Doggett;editing Sofina Mirza-Reid

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