Oct 18, 2016

Congress Should End Corporate Welfare for Biodiesel

Post by Derek Yale

It’s no secret that America’s tax code is riddled with carve-outs for special interests. But now we’re also learning that such corporate welfare allows fraud to flourish—at taxpayers’ expense.

The federal government currently awards a generous tax credit to domestic blenders of biofuel products. According to Reuters, two biofuel executives in Indiana have “[defrauded] the U.S. government’s renewable fuel support program and a tax credit program.” Specifically, the two executives claimed the $8 million worth of credits for products that didn’t qualify for anything.

This incident is indicative of the larger problem with such handouts, of which there are hundreds in the federal code: They are complicated, distortive of the market and allow special interests to benefit at the expense of everyone else.

The biodiesel tax credit clearly demonstrates how waste, fraud and abuse accompany such policies. Even the system for fraud investigations is wasteful. As Bloomberg News reports, “investigations into suspected fraud in biofuels credits can be extremely complex,” requiring efforts by multiple agencies that don’t often intersect—from the EPA to the IRS to even the Securities and Exchange Commission. The result is even more taxpayer money thrown down the drain.

Even if there was no fraud, the biodiesel tax credit still costs taxpayers over $2.5 billion for a two-year extension. The evidence clearly indicates that it should be eliminated as soon as possible. With this and numerous other special interest carve-outs set to expire in December, Congress has an opportunity to ignore lobbyists’ calls for more special-interest handouts. It’s time to put taxpayers’ interests ahead of special interests.