Grassley is Key to Securing Inclusion of Biodiesel, Ethanol Tax Credits in Tax Agreement

WASHINGTON - Prevailing in the view that ethanol and biodiesel offer the most effective alternative to foreign oil and support hundreds of thousands of jobs in the United States, Sen. Chuck Grassley today said the tax agreement negotiated between congressional leaders and the White House contains an extension of the ethanol and biodiesel tax credits and an extension of the ethanol tariff at current rates.  The Senate and House next will need to vote on the tax agreement to advance the provisions.

"Ethanol has proven its value as a homegrown, renewable fuel and, in light of the hundreds of billions of dollars shipped abroad as a result of foreign oil dependence, ethanol is a relative bargain," Grassley said.  "Biodiesel also builds energy independence.   Our country spends more than $730 million a day on imported petroleum.  Letting these items lapse would be a textbook case of penny-wise, pound-foolish legislating."

Grassley fought tooth and nail to secure the inclusion of the ethanol and biodiesel provisions in the tax legislation agreement negotiated by the White House and congressional leaders, facing efforts by some congressional majority Democrats and the White House to undermine biofuels production. He also marshaled like-minded senators to voice support for continuing these economy-boosting provisions.

Under the tax agreement, the ethanol tax credit - known as the volumetric ethanol excise tax credit, or VEETC, also known as the blenders' credit - will continue at its current level of 45 cents through Dec. 31, 2011.  The tariff on imported ethanol will continue at its current level of 54 cents.   "The United States already provides generous duty-free access to ethanol from Brazil and other countries imported under the Caribbean Basin Initiative, but the CBI cap has never once been fulfilled.  In fact, in 2009, only 25 percent of it was even used by Brazil and other countries, and for this year, the figure is projected to be less than 1 percent," Grassley said.

The current congressional majority allowed the blenders' tax credit for biodiesel to expire at the end of 2009, causing the loss of nearly 23,000 jobs.  The tax agreement would extend the biodiesel credit retroactively to cover all of 2010 and through the end of 2011.

"It's tragic to lose nearly 23,000 jobs in this economy," Grassley said.  "We can't risk a repeat performance with ethanol, where 112,000 jobs are at stake.  Getting these tax provisions extended will boost jobs and investment in the alternative energy sector, exactly when the economy needs a real shot in the arm."

Grassley has worked at every opportunity to extend the biodiesel and ethanol tax credits.  He and Sen. Maria Cantwell filed a biodiesel bill in August 2009, and he's pushed for action ever since, including making unanimous consent requests this summer, which were objected to by Democratic leaders.  He also filed a biodiesel tax credit amendment to the small business lending bill.   Grassley and Sen. Kent Conrad introduced a bill in April to extend the ethanol tax incentives, and Grassley has pushed to keep these green-energy job-creating incentives at the forefront.

Grassley has a long record of building support for alternative energy sources.  He worked to dramatically expand the wind energy tax credit that he first authored in 1992.  Also included in the 2005 energy tax incentives package were major Grassley-written extensions and expansions for biodiesel, biomass, ethanol and solar energy.   Grassley also took on and derailed a deceptive smear campaign launched by Washington lobbyists against ethanol that threatened to hinder the ethanol industry.

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Washington, D.C. – Senator Tom Harkin (D-IA) released the following statement this evening after the President's press conference on reaching a deal with Senate Republicans on an extension of the Bush-era tax cuts.

"To say that I am disappointed with the deal the President laid out tonight is an understatement.  Senate Republicans have successfully used the fragile economic security of our middle class and the hardship of millions of jobless Americans as bargaining chips to secure tax breaks for very wealthiest among us.  With record unemployment and millions of Americans falling off the benefit rolls just as we near Christmas, America faces an emergency situation, and under these circumstances the validity of extending unemployment benefits and tax rates for the middle class stands on its own.  The same cannot be said for extending tax breaks for millionaires - they face no immediate hardship, such a move will not spur economic growth, and doing so will only add hundreds of billions to the deficit.  In addition, by extending tax rates for two years but unemployment benefits for only one, we almost ensure that a Republican-led Congress will be able to block a further extension of unemployment benefits if they are needed.

"I've asked this question before, and tonight I ask it again - Have the Republicans lost all sense of fairness? Have they lost all sense of justice? Have they lost all sense of what's right and wrong? They can fight for their tax breaks for the wealthy, fine. But to say that we cannot extend unemployment benefits for people out of work without giving tax breaks to the wealthy - that's a moral outrage."

Floor Statement of U.S. Senator Chuck Grassley

Ranking Member of the Committee on Finance

Still Another Chapter of Revisionist Fiscal History: Lame Duck Tax Relief Debate

Thursday, December 2, 2010

Since yesterday, we've witnessed in this chamber the resumption of a set of tired and worn talking points that the other side drags out whenever they are forced to finally get around to discussing tax policy.

By once again beating the same dead horse, the other side has attempted to go back in time, again, and talk about fiscal history. Earlier this week there has been a lot of revision or perhaps editing of recent budget history.  I expect more of it from some on the other side.

The revisionist history basically boils down to two conclusions:  1. That all of the "good" fiscal history of the 1990's was derived from a partisan tax increase bill of 1993; and 2. That all of the "bad" fiscal history of this decade to-date is attributable to the bipartisan tax relief plans

Not surprisingly, nearly all of the revisionists who spoke generally oppose tax relief and support tax increases.  The same crew generally support spending increases and oppose spending cuts.

For this debate, it is important to be aware of some key facts.  The stimulus bill passed by the Senate, with interest included, increased the deficit by over $1 trillion.  The stimulus bill was a heavy stew of spending increases and refundable tax credits, seasoned with small pieces of tax relief.  The bill passed by the Senate had new temporary spending, that, if made permanent, will burden future budget deficits by over $2.5 trillion.  That's not Senate Republicans speaking.  It's the official Congressional scorekeeper, the Congressional Budget Office (CBO).  In fact, the deficit effects of the stimulus bill, passed within a short time after Democrats assumed full control of the Federal Government, roughly exceeded the deficit impact of the 8 years of bipartisan tax relief.

All of this occurred in an environment where the automatic economic stabilizers thankfully kicked in to help the most unfortunate in America with unemployment insurance, food stamps and other benefits.

That anti-recessionary spending, together with lower tax receipts, and the TARP activities, set a fiscal table of a deficit of $1.4 trillion that was the highest deficit, as a percentage of the economy, in Post World War II history.

From the perspective of those on our side, this debate seems to be a strategy to divert, through a twisted blame game, from the facts before us.  How is the history revisionist?  Let's take each conclusion one-by-one.

The first conclusion is that all of the "good" fiscal history was derived from the 1993 tax increase.  To test that assertion, all you have to do is take a look at data from the Clinton Administration.

The much-ballyhooed 1993 partisan tax increase accounts for 13 percent of the deficit reduction in the 1990's.  Thirteen percent.  That thirteen percent figure was calculated by the Clinton Administration's Office of Management and Budget (OMB).

The biggest source of deficit reduction, 35%, came from a reduction in defense spending.  Of course, that fiscal benefit originated from President Reagan's stare-down of the communist regime in Russia.

The same folks on that side who opposed President Reagan's defense build-up take credit for the fiscal benefit of the "peace dividend."

The next biggest source of deficit reduction, 32%, came from other revenue.

Basically, this was the fiscal benefit from pro-growth policies, like the bipartisan capital gains tax cut in 1997, and the free-trade agreements President Clinton, with Republican votes, established.

The savings from the policies I've pointed out translated to interest savings.  Interest savings account for 15% of the deficit reduction.

Now, for all the chest-thumping about the 1990s, the chest thumpers, who push for big social spending, didn't bring much to the deficit reduction table in the 1990's.  Their contribution was 5%.

What's more the fiscal revisionist historians in this body tend to forget who the players were.  They are correct that there was a Democratic President in the White House.  But they conveniently forget that Republicans controlled the Congress for the period where the deficit came down and turned to surplus. They tend to forget they fought the principle of a balanced budget that was the centerpiece of Republican fiscal policy.

Remember the government shutdown of late 1995?  Remember what that was about?  It was about a plan to balance the budget.  We are constantly reminded of the political price paid by the other side for the record tax increase they put in the law in 1993.  Republicans paid a political price for forcing the balanced budget issue in 1996.  But, in 1997, President Clinton agreed.  Recall as well all through the 1990's what the year-end battles were about.

On one side, Congressional Democrats and the Clinton Administration pushed for more spending.  On the other side, Congressional Republicans were pushing for tax relief.

In the end, both sides compromised.  That's the real fiscal history of the 1990's.

Let's turn to the other conclusion of the revisionist fiscal historians.  That conclusion is that, in this decade, all fiscal problems are attributable to the widespread tax relief enacted in 2001, 2003, 2004, and 2006.

In 2001, President Bush came into office.  He inherited an economy that was careening downhill.  Investment started to go flat in 2000.  The tech-fueled stock market bubble was bursting.  After that came the economic shocks of the 9-11 terrorist attacks.

Add in the corporate scandals to that economic environment.

And it's true, as fiscal year 2001 came to close, the projected surplus turned to a deficit.  But it is wrong to attribute the entire deficit occurring during this period to the bipartisan tax relief.  According to CBO, the bipartisan tax relief is responsible for only 25% of the deficit change, while 44% is attributable to higher spending, and 31% is attributable to economic and technical changes. In just the right time, the 2001 tax relief plan started to kick in.   As the tax relief hits its full force in 2003, the deficits grew smaller.  This pattern continued up through 2007.

If my comments were meant to be partisan shots, I could say this favorable fiscal path from 2003 to 2007 was the only period, aside from 6 months in 2001, where Republicans controlled the White House and the Congress.   But, unlike the fiscal history revisionists, I'm not trying to make any partisan points, I'm just trying to get to the fiscal facts.

There is also data that compares the tax receipts for four years after the much-ballyhooed 1993 tax increase and the four year period after the 2003 tax cuts.  I have a chart that tracks those trends.

In 1993, the Clinton tax increase brought in more revenue as compared to the 2003 tax cut.  That trend reversed as both policies moved along.

Over the first few years, the extra revenue went up over time relative to the flat line of the 1993 tax increase.

So, let's get the fiscal history right.

The pro-growth tax and trade policies of the 1990's along with the "peace dividend" had a lot more to do with the deficit reduction in the 1990's than the 1993 tax increase.  In this decade, deficits went down after the tax relief plans were put in full effect.

No economist I'm aware of would link the bursting of the housing bubble with the bipartisan tax relief plans of 2001 and 2003.

Likewise, I know of no economic research that concludes that the bipartisan tax relief of 2001 and 2003 caused the financial meltdown of the September and October 2008.

As I said, from the period of 2003 through 2007, after the bipartisan tax relief program was in full effect, the general pattern was this:  revenues went up and deficits went down.

One major point that needs to be said right here is to state where the government gets the money it spends.  Basically I'm asking "Where do taxes come from?"

I would have thought this would have been perfectly obvious to most people, but I may have been wrong.  Taxes come from taxpayers!  I say this because we have heard tax relief for certain individuals referred to as a bonus.  A search of The Congressional Record for the Senate on December 1, 2010, shows that the word "bonus" was said nearly 50 times.

The implication being that by extending tax relief for all Americans we are giving some people a bonus that other people are paying for.  Let me try to simplify this for my colleagues that are having trouble understanding.  There is no proposal to cut taxes for anyone before this body.  The question is are we going to allow taxes to go up, or are we going to prevent a tax increase?  If we prevent taxes for everyone from going up, we are letting taxpayers keep more of their own money that they have earned and worked hard for.  No one is proposing a bonus or a gift for anyone.  The question is, do we want taxpayers to have more or less of their own money.

My colleagues on the other side have been especially incensed by what they consistently refer to as "tax cuts for the rich" and seem to believe that tax relief for everyone is responsible for our disastrous budget situation.  However, I think nearly everyone serving in the chamber, and certainly the President and House and Senate leadership, supports extending around 80% of tax relief.  If those on the other side are serious in their pleas that taxes must be increased in the name of fiscal responsibility, how can they claim 80% of tax relief is absolutely necessary and that 20% of tax relief is absolutely wrong?

This chart, drawn from Congressional Budget Office (CBO) data, should get more insight into the two groups the other side is talking about.  The orange line measures the effective tax rate paid by the top 5% of taxpayers.  By the way, this is where the Small business owner tax hit occurs.  This group roughly represents those taxpaying families with incomes over $250,000.  Under the Democratic Leadership's preferred tax policy, this line will go back up to where it was in 2000.  Republicans would prefer to prevent this tax increase, and we have shown that it falls primarily on the backs of small businesses.  The main point this chart shows though is that the tax relief undertaken during the last administration benefited all taxpayers, and characterizing it as "tax-cuts-for-the rich" is simply not accurate.

Of course I want to put our country on a path to fiscal responsibility, but I do not believe that higher taxes will lead us to that path.  Rather we need to carefully examine how we spend the money we already collect.  This debate is about one fundamental question. Who does the money you, the taxpayer, have worked hard for belong to?  Does it belong to the citizen that earned it, or does it belong to the government?  Is whatever the taxpayer is left with an allowance, with the balance to be spent by a government that knows best?  I think most people would answer my last two questions with a strong "No."

As we continue to discuss pressing tax matters in Congress, we need to keep these fundamental and simple truths in mind.  We need to stop taxes from increasing for all Americans.

Charts used:

Spending Largest Source of Deficit Change Since 2001

Changes in Federal Revenue as a Percentage of GDP

Inherited Deficits 2009 - 2019

Deficits 2001 - 2019

Source of Deficit Reduction 1990 - 2000

Tax Relief vs. Stimulus

Total Effective Federal Tax Rates 1979 - 2007

SPRINGFIELD -- The mayors of Illinois' nine riverfront communities with gaming casinos are asking state lawmakers in Springfield to reject proposed slot machines at Illinois' horse tracks. The mayors agree that these riverfront communities are already struggling and can't afford to lose more jobs in such a poor economic climate.

The mayors of Aurora, Elgin, Joliet, Peoria, Alton, East St. Louis, Des Plaines, Rock Island and Metropolis said their towns have formed a new coalition called Cities Against Slots at the Tracks (CAST). Representatives from the coalition will participate in a drive-down to Springfield on November 16 - the first day of the General Assembly fall veto session -- to protest the legislation. The Mayor of Peoria, which receives a share of local revenue from the nearby Par-a-Dice Casino, has signed on and the organization expects other groups to support the coalition as well.

One of the slots at the racetracks proposals would allow 6,300 slot machines at Illinois' six racetracks, and would create five additional casino licenses --- one license each for Chicago, Lake County, Danville, Ford Heights and Rockford. The millionaire owner of Arlington Racetrack wants slot machines for the track when Arlington Heights has a 7 percent unemployment rate, one of the lowest in the state. The nine riverboat cities have unemployment rates ranging from 8.9 percent to 17.2 percent as of September 2010.

"The intent of the original Illinois Riverboat Gambling Act of 1990 was to create jobs in older Illinois River communities with a need for economic development projects," said Aurora Mayor Thomas Weisner, whose city has the Hollywood Casino. "We should continue to focus on the original intent of the act, which is providing jobs and economic development for river cities, not for millionaire track owners and well to do communities," said Weisner.

"Elgin's riverboat, the Grand Victoria, will suffer terribly with slots at nearby horse tracks," said Mayor Ed Schock.  "This legislation further divides the state's pool of gambling revenues and shortchanges the same river communities that the original riverboat gambling law was meant to support," Schock said.

Joliet Mayor Art Schultz has two riverboat casinos in his city. "We are working with riverboat owners to examine the potential impact of slots at the tracks. We believe that this legislation will be extremely harmful to Joliet, Will County and surrounding communities by decreasing our riverboat revenues," Mayor Schultz said.

According to a report from the General Assembly's Commission on Government Forecasting and Accountability, the riverboat gambling industry is already suffering in Illinois from many factors.

• In Fiscal Year (FY) 2010, the State's share of horse racing, lottery, and riverboat revenue reached $1.019 billion, a 4.5% decline from FY 2009 levels. This is the lowest combined total for these revenue sources since FY 2001. The $48 million falloff in overall gaming receipts was almost entirely due to a decline in riverboat transfers to the Education Assistance Fund as lottery transfers and horse racing revenues held flat in FY 2010.

• In FY 2010, lottery transfers comprised 61.7% of total gaming revenues, whereas riverboat transfers comprised 37.6%, and horse racing comprised of 0.7%. Overall gaming per-capita spending declined 3.0% in FY 2010 to $188. This was the third consecutive year of a decline in overall per-capita spending after three consecutive years of increases. 

• Statewide adjusted gross receipts (AGR) for Illinois riverboats in FY 2010 were down 5.0% from FY 2009 levels while admissions were up slightly at 0.6%. This is the third consecutive year of declines in total AGR. State revenues from riverboat gambling totaled $398.4 million, which was a 10.3% decline from FY 2009 levels and was the lowest amount generated since FY 2000. 

• Several factors have contributed to the dramatic downturn in riverboat figures over the last three fiscal years. These factors include the struggling economy, increased competition from other states, and the effects of the graduated tax structure. However, the numbers continue to suggest that the biggest contributor to the drop in Illinois casino revenues is the indoor smoking ban. Since the indoor smoking ban began in January 2008, adjusted gross receipts for Illinois riverboats have fallen a combined 28.0% from pre-smoking ban levels.

• From a regional standpoint, when comparing CY 2007 (pre-smoking ban) vs. CY 2009, AGR for the Chicago area riverboats have dropped 32.8% since the indoor smoking ban began, while the receipts for Indiana's four closest riverboats in the Chicago area have only fallen 0.4%. Similarly, Illinois' AGR figures are down 26.3% for Illinois' two St. Louis area riverboats between CY 2007 and CY 2009, while the AGR of Missouri's St. Louis region riverboats are up 19.5% (although part of this increase is due to a new riverboat in St. Louis). 

• Using FY 2010 adjusted gross receipts as a guideline, Illinois made up 36.3% of total receipts in the Quad City region (compared to Iowa's 63.7%), 20.6% of total receipts in the St. Louis region (compared to Missouri's 79.4%), and 46.7% of total receipts in the Chicago region (compared to Indiana's 53.3%).

• Riverboats created $84.6 million in local revenue for governments in FY2010, down from $116.1 million in FY 2007. 

East St. Louis Mayor Alvin Parks said his city is already suffering from a massive new casino in St. Louis, Missouri, a city with no smoking ban. "It's hard enough to compete with Missouri's new sparkling Lumiere Casino but East St. Louis shouldn't also have to compete with slot machines at nearby Fairmount Park," Parks said.

Des Plaines Mayor Marty Moylan, whose new casino is scheduled to open in November 2011, said the legislation will hurt Des Plaines and coalition of mayors will work tirelessly to defeat slots at the tracks legislation. 

The casino gaming industry provides nearly 7,543 jobs, and every year injects more than $1 billion into the state's economy. In 2008, we spent nearly $145.5 million with local vendors and suppliers and stimulate tourism, attracting numerous of out-of-state visitors a year to our communities.

"If we are talking about saving jobs in Illinois, let's protect the employment of more than 7,500 people already working at our riverboat casinos in the state," Moylan said.

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