Tuesday, May 16, 2006

Of Ethanol Protectionism and Corporate Welfare

Two decisions, one by congress and one by the Supreme Court, weave a web of government wading to deeply into the free market.

From The Boston Globe:

In a big win for U.S. ethanol producers, House Majority Leader John Boehner said on Monday he will not push legislation to reduce the U.S. tariff on ethanol imports.

U.S. oil refiners are scrambling to secure ethanol supplies to mix with gasoline this summer as they switch from using the water-polluting fuel additive MTBE. But the Energy Department has warned that U.S. ethanol supplies will fall short and refiners will need to rely on more imports.

Boehner, who is from Ohio, said last week that the United States was not producing enough ethanol to meet demand and that a temporary reduction in the 54-cent-a-gallon tariff could help boost available supplies and lower gasoline prices.

When asked if there were enough votes in both the House and Senate to approve legislation lifting the ethanol tariff, Boehner told reporters: "I think it's possible."

However, House Speaker Dennis Hastert from the big ethanol-producing state of Illinois said later that he did not believe there was "an economic plus" in lifting the ethanol tariff "right now."

I like both men, but Rep. Boehner is correct. Ethanol-producers oppose lifting the tariffs because foreign competition would lower the price.

The number one reason, I believe, for the president and congress's low poll numbers is the high cost of gasoline. This decision will hurt, not help.

The second development comes from SCOTUS.

From Bloomberg.com:

The U.S. Supreme Court, in a ruling that may shield billions of dollars in corporate tax breaks from legal attack, reinstated an Ohio manufacturing tax credit for DaimlerChrysler AG.

The justices, voting unanimously, today said a group of Ohio and Michigan taxpayers and businesses lacked the legal right to challenge the Ohio credit. The decision overturned a federal appeals court that said the state credit illegally discriminated against Ohio corporate taxpayers that invested in other states.

While this was not a "blessing from on high" for these tax breaks, the ruling renders the possibilities of overturning such sugarplums from states unlikely.

While the inability to oppose tax breaks is coded in my DNA, such decisions by state governments beg a question: If high taxes are bad for DaimlerChrysler, how about all of the other companies in Ohio? Doesn't Betty Smith of Cleveland and Steve Jones of Marietta deserve a break as well?

DaimlerChrysler can afford to hire lobbyists and get breaks from legislators with now full campaign chests -- Miss Smith and Mr. Jones cannot.

It ain't right.

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