Industry News | September 19, 2011

Chain Restaurants: Repeal Ethanol Tax Credit

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The National Council of Chain Restaurants (NCCR) and 16 of its member companies asked Congress’ “super committee” to repeal a federal tax credit for corn-based ethanol producers and a related tariff on imported ethanol, saying the provisions drive up food prices for consumers and eliminating them could help reduce the deficit.

“Our interest in this issue is due to the high food commodity costs facing all consumers and all channels of the food service industry,” the NCCR and companies said in a letter to members of the Joint Select Committee on Deficit Reduction. “Strong empirical evidence shows a direct link between U.S. policy to subsidize and support the corn ethanol industry and increased demand for corn, which is the dominant ingredient in livestock feed in the United States.”

The NCCR has long argued that the 45-cents-per-gallon Volumetric Ethanol Excise Tax Credit and a 54-cents-per-gallon tariff on imported ethanol encourage the use of U.S. corn for ethanol production while discouraging the importation of lower-cost ethanol that would help the U.S. meet its energy needs without diverting crops needed for food production. The use of corn for ethanol drives up the cost of a wide range of food, from corn itself to meat from corn-fed livestock.

“Chain restaurant companies are food retailers and as such the impacts of the current ethanol subsidies are acutely felt by restaurant operators in the form of higher wholesale and retail food prices,” NCCR executive director Rob Green said. “The high level of industry participation on this letter is significant and demonstrates the breadth and depth of concern about this issue within the industry.”

The letter was directed at the joint committee because the panel has been charged with finding ways to reduce the federal deficit by $1.5 trillion over the next 10 years. The tax credit costs the U.S. treasury about $6 billion a year and its repeal would contribute to the panel’s goal in addition to being sound public policy.

The tax credit and tariff are scheduled to expire December 31, and the Senate voted in June to eliminate both. But the letter expressed concern that they might yet be renewed, or that supporters would seek to have them replaced with other subsidies.

The letter was signed by Arby’s, Brinker International, Burger King, Carlson Restaurants Worldwide, CKE Restaurants, Cracker Barrel Old Country Store, Darden Restaurants, DineEquity, Domino’s Pizza, Dunkin’ Brands, International Dairy Queen, McDonald’s, OSI Restaurant Partners, Wendy’s, White Castle, and Yum! Brands. In addition to the super committee, copies went to all members of the House and Senate.

In addition to the letter, NCCR is a leading member of a coalition of food industry groups that sent a letter to the House Ways and Means Committee, House Energy and Commerce Committee and Senate Finance Committee earlier this week saying the tax credit should be repealed during the current “time of spiraling deficits.” The coalition letter was signed by 104 organizations.

Comments

The "federal tax credit for ethanol producers" is incorrect in that the tax credit goes to the blender of the fuel which is usually the oil company and not the ethanol producer. Ideally the oil company would pass along that credit at the E85 pumps to promote the sale of that renewable fuel product, but I have a feeling the oil companies have been pocketing the tax credit as profit.The cost of food has gone up in the past few years, mainly due to increased demand from the Asian market. The US still has the most affordable food supply in the world with only 6.9% of personal consumption expenditures being spent on food at home. In other countries such as India, 35.4% of personal consumption expenditures are being spent on food at home.Tariffs on any products are put in place to protect the domestic production of comparable or equal products. . .discussions on that policy encompass much more than ethanol.

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