At this time of year more than any other, Americans feel the costs of government.
By Apr. 15, Americans with income must produce documents guessing at their 2005 tax liabilities, along with whatever payments may be in order. They guess because lawmakers doing favors for narrow interests have made an impenetrable hash of tax law.
Many Americans employ specialists to sort it all out and might not notice how perplexing tax preparation has become. Most who do notice steam about it awhile only to retreat into their own, more comprehensible affairs until reminded again the following April.
Meanwhile, the army of tax specialists grows, never losing its focus on the exemption-riddled, means-tested, endlessly cross-referenced confusion on which it feeds, ready to lobby any suggestion for change into oblivion.
Angry yet? Good. This item is about how much Congress—author of the Tax Code—will cost the US Treasury with its ethanol mandate for gasoline.
In a footnote to a report issued last July, the US Energy Information Administration calculated that every gallon of fuel ethanol reduces federal excise tax revenue by 44.9¢. A gallon of ethanol displaces two thirds of a gallon of gasoline and enjoys a tax benefit of a net 32.6¢. That's the difference between the federal gasoline excise of 18.4¢ and the ethanol tax credit of 51¢. Adding 12.3¢ of federal tax forgone on two thirds of a gallon of gasoline yields 44.9¢.
The Energy Policy Act of 2005 requires fuel ethanol sales of 4 billion gal in 2006, 4.7 billion gal in 2007, 5.4 billion gal in 2008, 6.1 billion gal in 2009, 6.8 billion gal in 2010, 7.4 billion gal in 2011, and 7.5 billion gal in 2012.
That's 41.9 billion gal during the mandate's phase-in for a reduction in federal revenue of $18.8 billion, an average of $2.7 billion/year. After 2011, the cost is $3.4 billion/year.
Against the whole federal budget, that's not much. But the government won't do without the money.
And it's money Americans otherwise could put to productive use such as paying strangers to guess how much tax they owe.
(Online Apr. 7, 2006; author's e-mail: [email protected])