Ethanol Tax Exemption

Pursuant to a congressional request, GAO provided information on the possible effects of eliminating the current tax exemption for ethanol, focusing on the estimated: (1) decline in ethanol use; and (2) fiscal effects on the Treasury and changes in farm income payments resulting from the decline in ethanol use. GAO noted that: (1) ethanol usage would likely decline by between 50 and 90 percent if the tax exemption is eliminated; (2) if ethanol use declines by 50 percent, the Treasury would lose between $2.5 and $3.2 billion from 1996 through 2000; (3) if ethanol use declines by 90 percent, the Treasury would lose between $5.4 and $6.3 billion from 1996 through 2000; and (4) farm income from corn would decline as a result of any decline in ethanol use.