Federal Tax Cut Plan Would Also Extend Tax Credits for Ethanol

The tax cut deal worked out by President Obama and Senate Republicans includes a one-year extension of tax credits for ethanol --- although at 36 cents a gallon, which is down nine cents from the existing 45-cent tax credit set to run out Dec. 31st.

A spokesman for Illinois Congressman Tim Johnson, Phil Bloomer, said the one-year extension is shorter than what the Urbana Republican would prefer. Instead, Johnson said he wants a permanent extension of the tax credits.

"If you take these away, as it seems to indicate at this point," Bloomer said. "I think that would have severe consequences for farm states, for central Illinois and the entire Midwest."

But even a one-year extension of the the ethanol tax credit, even at a lower rate, would be good news to Illinois Corn Growers Association Board President Jim Reed. Reed said the tax credit has been key to making ethanol available to consumers, but he said it is time to look for a different way to encourage ethanol production, and an extension would give the industry time to do that.

"By it being extended a year," Reed said. "That really gives us the opportunity to stand back and think about what we can do to increase access to ethanol and make it more available to the consumer, and really do what we can help us limit that importation of the foreign oil."

But Clark Bullard with the Prairie Rivers Network said he does not care for the proposed extension of ethanol tax credits. The U of I Engineering professor said so much of the corn crop goes to making ethanol that corn prices are up, leading to higher food prices and environmental abuses.

"It has given farmers tremendous incentives to clear the last little strip of wildlife habitat, and ... bring highly erodible land into production, just to get more acres of corn at this higher price," Bullard said.

Bullard said even if the ethanol tax credit was dropped, federal mandates for ethanol use would still keep production up to a certain level. He supports further research into ethanol made from ethanol made from grasses or wood chips as an alternative to corn.