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Tax Policy: Effects of the Alcohol Fuels Tax Incentives

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Report Type Reports and Testimonies
Report Date March 6, 1997
Report No. GGD-97-41
Subject
Summary:

In the late 1970s and early 1980s, Congress enacted tax incentives for biomass-derived alcohol fuels. Proponents maintained that the incentives would reduce U.S. dependence on petroleum imports and would provide an additional market for U.S. agricultural products. Subsequent environmental legislation has boosted the demand for alcohol fuels, which are blended with gasoline to increase its oxygen content in areas of the country with mandatory minimum oxygen requirements for transportation fuel. In recent months, Congress has debated the need for continuing the tax incentives for alcohol fuels. This report answers the following questions on tax incentives for alcohol fuels: Whom do the incentive benefit and harm economically? What environmental benefits have the incentives produced? Have the incentives increased the nation's economic independence? To what extent has the partial exemption from the excise tax for alcohol fuels reduced the flow of revenue into the Highway Trust Fund?

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