The Meat Tax
By INVESTOR'S BUSINESS DAILY | Posted Thursday, April 12, 2007 4:20 PM PT
Energy Policy: Those who want to end global warming and our reliance on foreign oil often propose a massive "carbon tax" to make crude less appealing. Don't look now, but you're already paying it.
By heavily subsidizing the use of ethanol, a fuel additive less efficient than gasoline and costlier to produce, Congress has, in effect, enacted a tax hike.
No, it's not the kind you see at the pump each time you fill up like the current 18.4-cents-a-gallon federal levy on gasoline. Rather, it's the kind of tax you pay quietly, without even realizing it.
We thought about this after reading the Agriculture Department's estimates that the supply of beef, pork and chicken will plunge by a billion pounds this year. Why? The cost of feedstock has soared to $4 a bushel, 30% above last year's average, which was the highest in a decade. It means a cut of 1.7 pounds per person in the amount of meat produced and higher prices.
Problem is, when people buy meat this year, they'll just chalk up the higher price to "inflation." It's not. It's a tax. And because of that tax, we grow less corn for our mouths and more for our cars.
In short, our subsidy for ethanol has become a tax on food.
The government says U.S. food prices will rise 3.5% this year. But we're not alone. Mexico, highly dependent on U.S. corn imports for tortillas, has been hit even harder. As a result, you can expect more impoverished Mexicans fleeing to the U.S., adding further billions to what we pay each year on welfare and health costs for the 12 million illegals already here. That's another hidden tax.
We currently subsidize ethanol to the tune of nearly $7 billion a year, a big transfer of wealth to farmers that encourages them to switch from food corn to fuel corn. Meanwhile, we slap a 54-cents-a-gallon tariff on ethanol from places like Brazil. So a viable, competitive alternative is frozen out of the market.
Such taxes are a hugely inefficient way to reduce our use of oil. Are they worth it? No. They'll barely dent our energy use. Even if you took all the corn produced in America and turned it into ethanol, University of Minnesota researchers estimate, it would cut gasoline consumption just 12%. To replace all gasoline, it'll take all our cropland plus 20% more with no food production at all.
Of course, we could buy a lot of ethanol from Brazil more cheaply, but each time removing the tariff is discussed, the farm lobby starts twisting arms on Capitol Hill. So don't hold your breath.
A strong case can be made for reducing our dependence on foreign oil. Today, 60% of our crude supplies come from overseas, making us vulnerable and less secure.
There are many things that can and should be done. Build more nuclear power plants. Find more domestic sources of oil. Use less energy in our homes and workplaces. Develop new alternatives that might be able to replace oil, like hydrogen fuel cells.
That said, it's silly to impose new layers of inefficient taxes, most of which we don't even realize we're paying, in a futile effort to cut our reliance on foreign oil. We'll end up paying more not just for our energy, but for lots of other necessities as well. Like food.
By INVESTOR'S BUSINESS DAILY | Posted Thursday, April 12, 2007 4:20 PM PT
Energy Policy: Those who want to end global warming and our reliance on foreign oil often propose a massive "carbon tax" to make crude less appealing. Don't look now, but you're already paying it.
By heavily subsidizing the use of ethanol, a fuel additive less efficient than gasoline and costlier to produce, Congress has, in effect, enacted a tax hike.
No, it's not the kind you see at the pump each time you fill up like the current 18.4-cents-a-gallon federal levy on gasoline. Rather, it's the kind of tax you pay quietly, without even realizing it.
We thought about this after reading the Agriculture Department's estimates that the supply of beef, pork and chicken will plunge by a billion pounds this year. Why? The cost of feedstock has soared to $4 a bushel, 30% above last year's average, which was the highest in a decade. It means a cut of 1.7 pounds per person in the amount of meat produced and higher prices.
Problem is, when people buy meat this year, they'll just chalk up the higher price to "inflation." It's not. It's a tax. And because of that tax, we grow less corn for our mouths and more for our cars.
In short, our subsidy for ethanol has become a tax on food.
The government says U.S. food prices will rise 3.5% this year. But we're not alone. Mexico, highly dependent on U.S. corn imports for tortillas, has been hit even harder. As a result, you can expect more impoverished Mexicans fleeing to the U.S., adding further billions to what we pay each year on welfare and health costs for the 12 million illegals already here. That's another hidden tax.
We currently subsidize ethanol to the tune of nearly $7 billion a year, a big transfer of wealth to farmers that encourages them to switch from food corn to fuel corn. Meanwhile, we slap a 54-cents-a-gallon tariff on ethanol from places like Brazil. So a viable, competitive alternative is frozen out of the market.
Such taxes are a hugely inefficient way to reduce our use of oil. Are they worth it? No. They'll barely dent our energy use. Even if you took all the corn produced in America and turned it into ethanol, University of Minnesota researchers estimate, it would cut gasoline consumption just 12%. To replace all gasoline, it'll take all our cropland plus 20% more with no food production at all.
Of course, we could buy a lot of ethanol from Brazil more cheaply, but each time removing the tariff is discussed, the farm lobby starts twisting arms on Capitol Hill. So don't hold your breath.
A strong case can be made for reducing our dependence on foreign oil. Today, 60% of our crude supplies come from overseas, making us vulnerable and less secure.
There are many things that can and should be done. Build more nuclear power plants. Find more domestic sources of oil. Use less energy in our homes and workplaces. Develop new alternatives that might be able to replace oil, like hydrogen fuel cells.
That said, it's silly to impose new layers of inefficient taxes, most of which we don't even realize we're paying, in a futile effort to cut our reliance on foreign oil. We'll end up paying more not just for our energy, but for lots of other necessities as well. Like food.
