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The Hidden Taxes of Ethanol

January 3, 2009

How States Benefit From Ethanol, Taxwise

States may give away your taxes as corporate welfare to ethanol companies directly, but they get a bonanza in gasoline taxes.  Every state has a per gallon gasoline tax.  In Oregon it is $0.24/gallon.  Ethanol will always reduce the mileage of your car.  It has to, it has less energy than gasoline.  By the physics of it, your mileage should decrease about 3% when using E10, but since nobody has ever done an independent, statistically significant test of all kinds of cars, new and old, we have no idea what the aggregate mileage loss to our country really is.  From anecdotal evidence it can be 10% or more, which would mean that the gasoline companies are sharing a bonanza with the ethanol companies because they are actually selling more gasoline than before the mandatory ethanol programs.

But the hidden tax increase comes from your mileage decline, no matter what it is.  You have to fill up your gas tank more often.  Everyone has to.  You have to buy more gasoline and ethanol.  Therefor the state is accruing more gas tax revenue.

Turns out that the federal government is too.  There is a federal gas tax on every gallon of gas.  It is supposed to pay for our interstate highway infrastructure, but the federal government lets the gasoline distribution terminal keep $0.45 of that tax for every gallon of ethanol they put into your gasoline.  Last year that amounted to more than $4.5 billion dollars that were witheld from the Federal Highway Trust Fund.  And you wonder why our interstate infrastructure is crumbling.

Read more here.

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