Better Tax Policies

Gas prices are still on the rise, and I’m pleased to see Congress trying to do something that demonstrates more long-term vision than cutting the gasoline tax and encouraging people to drive, and consume, more.

Here’s a quick recap of current policies on the agenda in Washington. Last week, Congress approved a huge farm bill (actually, they voted to override a veto – take that, Mr. Bush!), which includes a production tax credit of a penny per gallon for biofuels derived from cellulose. The same bill also cut the tax credit for standard, corn-based ethanol by 6 cents, to 45 cents per gallon.

I like both of these policies, and I like it even more that they were packaged together. A year ago, gas was expensive and ethanol was hailed as the energy industry’s savior. Today, gas is even more costly, but so are corn, rice, bread and many other basic food products. It doesn’t take a genius to figure out that farmers will sell their crops for energy production instead of food if it means they’ll make more money, and the higher price of gasoline has led to a surge in demand for ethanol. The crazy inflation at the supermarket this year was something that could have been easily predicted.

That’s why cellulosic fuels, which can be made from wood chips, switch grass, and many other plants that people don’t eat, are a very promising alternative. These two tax policies encourage people to develop energy sources made from crops that can be converted into fuel, without putting a dent in our dinner plate.

And in other encouraging news, lawmakers seem to have little interest in approving the gas-tax holiday that the presidential candidates have touted.