Ideas to Action:

Independent research for global prosperity

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I’ll admit that I’m not a Nascar fan, and I only watch horse racing during the Triple Crown (usually only the first two legs). But I am a big baseball fan and I still don’t think that my taxpayer dollars should be used to subsidize the building of fancy new stadiums, any more than they should be used to support race tracks or race horses. But what really disturbs me is that, with almost no scrutiny, my taxpayer dollars and yours might end up contributing to tropical deforestation and climate change.

The Washington Post reported last week that Senator Ron Wyden (D-OR), who recently took the helm of the powerful Senate Finance Committee, plans to move a bill this spring to extend a range of tax breaks that expired at the end of last year. Some of the items on the list, like the R&D tax credit, address market failures and are (relatively) noncontroversial. But for more provocative provisions in the bill, including the aforementioned NASCAR subsidy, Senator Wyden reportedly wants to hold separate committee votes. By federal budget standards, that perk for NASCAR is peanuts, with an estimated cost in 2013 of $20 million. (Still, that amount of money going to food aid could help feed a half million hungry kids in developing countries.) Indeed, the Joint Committee on Taxation estimates that over half of the tax provisions on the list compiled here cost $100 million/year or less, which is probably why even those with no obvious public benefit keep slipping through year after year.  

By contrast, the $1 per gallon tax credit for biodiesel is one of only seven on the 55 item list that cost US taxpayers $1 billion or more in 2013.* In other words,  it’s a relatively big expense. But my frustration with this tax policy isn’t just about the transfer of public resources for private benefit (soybean and biodiesel producers), it stems from the fact that this credit has great potential to produce global public bads. As I explained in an earlier post, the biodiesel tax credit could boost demand for Southeast Asian palm oil as an alternative feedstock to soy. And, just in case you need reminding, this initiative at the Center underscores why saving tropical forests is so important for climate change and development.

So what are we, the public, getting for our tax dollars and the increased risks from climate change? See if you can spot biodiesel in this chart from the US Energy Information Administration.


The Washington Post article I referenced at the top doesn’t mention whether extension of the biodiesel tax credit will be one of the controversial tax breaks that the Senate Finance Committee will vote on separately, but it should be. Then we can only hope that the extra scrutiny would encourage Congress to vote in favor of fiscal prudence and against a policy that benefits a few at the expense of many, here and abroad.

* In its most recent (2013) report, here, the Joint Committee on Taxation attributed minimal cost to the “extension of incentives for biodiesel and renewable diesel” (as it is called in the list linked to above and where it is also shown as having minimal cost) because it was scheduled to expire at the end of 2013. The tax credit is $1 per gallon and the industry has been producing about 1 billion gallons of biodiesel per year in recent years.