April 8, 2010

Not extending ethanol tax credit would cost Nebraska nearly 14,000 jobs

Nebraska would lose more than 13,700 jobs should the Volumetric Ethanol Excise Tax Credit (VEETC) not be renewed before it expires in December, the Nebraska Corn Board said in a news release yesterday. The release was response to a study released by the Renewable Fuels Association (RFA).

VEETC provides oil refiners and fuel blenders a 45-cent per gallon tax credit on each gallon of ethanol they blend with gasoline. The credit provides an important economic incentive to invest in equipment to blend and use ethanol, which in turn supports growth and advancements in the sector, the Nebraska Corn Board said.

“VEETC is an important component of our renewable fuels program, and now is certainly not the time to stunt the growth of biofuels or shock rural communities with significant job losses,” said Jon Holzfaster, a director of the Nebraska Corn Board and chair of the National Corn Growers Association ethanol committee. Holzfaster is a corn and cattle producer from Paxton.

The study, conducted for RFA by ENTRIX, an economic consulting firm, concluded that not renewing VEETC would cost the United States more than 112,000 jobs because as much as 37 percent of the ethanol industry would shut down. Since Nebraska is the second largest ethanol producing state, more than 12 percent of those jobs would be lost in and around mostly rural Nebraska communities that support an ethanol facility.

Some job losses would come from those directly involved in ethanol production, while other job losses would be caused by a reduction of dollars spent by ethanol producers – dollars that would normally flow throughout all sectors of the economy.

“There is legislation in front of Congress right now that will extend VEETC beyond December 31, when it is set to expire. It is important that Congress act on this legislation to keep renewable fuels on track,” he said.

In Nebraska, 20 ethanol plants are located in the third Congressional district, more than any other district in the U.S., and another four are located in the first district. “Those who support ethanol and rural economic development need to make sure their representatives understand the importance of VEETC,” Holzfaster said. “We’ll need their support to ensure it is renewed as quickly as possible.”

On a national scale, the research shows that not renewing VEETC would eliminate some $2.7 billion in state and local tax revenues and another $2.4 billion in federal tax revenue, reduce household income by $4.2 billion and reduce the gross domestic product by $16.9 billion, further eroding the economic output of the U.S. manufacturing sector.

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