On Friday, June 16, the Senate voted 73-27 in favor of eliminating the Volumetric Ethanol Excise Tax Credit (VEETC). The bipartisan vote, which reversed a Senate vote taken just two days prior, would discontinue a 45-cent-per-gallon tax incentive that goes to blenders and refiners when blending ethanol into gasoline.

For more, see ethanol

Deeply unhappy about the Senate’s move, many agricultural interests vilified the offending amendment pushed by Oklahoma Sen. Tom Coburn and California Sen. Dianne Feinstein.

For more, see Senate passes repeal of ethanol tax credit.

A second VEETC-related amendment – offered by Minnesota Sen. Amy Klobuchar and South Dakota Sen. John Thune – is backed by ethanol proponents. The Klobuchar/Thune bill would allow a “variable VEETC” to function only when oil prices falls below $90 per barrel. This, claim proponents, would mean some $1 billion in savings while providing some $1.5 billion to small producer tax credits.

Shortly after the vote, Farm Press spoke with Chad Hart, Iowa State University assistant professor of economics, about the situation.

For more, see What impact ethanol subsidies?

Hart, who studies and follows the ethanol industry, spoke on the Senate’s breach of tax legislation protocol, the Klobuchar/Thune alternative and how the House might react. Among his comments:

On the reason members of the House are agitated by the Senate’s VEETC vote…

“Traditionally, any bill that deals with taxes starts in the House.

“When the Senate made this move on the VEETC, it was a tax change and should have started in the House. Procedurally, that’s how Congress goes about it and is why the House is in an uproar.”

On what Coburn was trying to accomplish…

“Coburn wanted to put a marker, if you will, in the sand. He wanted to say ‘we’ll have this vote and show there are enough votes in the Senate to eliminate this tax credit, right now.’

“I think he was thinking ‘we’ll get this vote, and we’ll show the House we’re serious. The House will pick it up and vote on it.’

“It’s true this was a symbolic vote. But it was also a strategic vote. It is now established, by a sizeable majority, that there are enough votes in the Senate to completely get rid of the tax credit.”

On the Klobuchar/Thune alternative and a “variable VEETC”…

“Coburn/Feinstein would completely eliminate the tax credit. Klobuchar/Thune would provide a ‘scalable’ tax credit, based on oil prices.

“Under Klobuchar/Thune, if oil prices are low – a bad situation for the ethanol industry – the tax credit will be viable. If oil prices are high, the tax credit would disappear. The tax credit would only pay out, if you will, when oil prices are low.”