TESTIMONY LB 946
January 30, 2008
The Nebraska Corn Growers Association does not support LB 946. Our association has a long standing policy which opposes a direct tax on ethanol and its co-products.
Nebraska’s ethanol plants, their employees, ancillary service providers, and investors are subject to Nebraska property, income, sales, use, fuel, and a variety of other taxes. This industry contributes significantly to Nebraska’s economy and general fund revenue.
Rationalizing this new excise tax on the fact that a large portion of Nebraska produced ethanol is exported and therefore someone else will pay the tax is flawed. Most of Nebraska’s ethanol production is marketed through marketing groups who pool the output of several plants from across the Midwest. The ultimate price received by a Nebraska plant is the pooled price and that price is not affected by a plant’s individual cost of operation. Ethanol producers are price takers just like corn producers. As price takers they cannot just pass the tax on to their customers. They will be forced to absorb the tax within their operation or more likely the case, reduce the price they offer for corn.
The excise tax proposed by LB 946 has been compared to severance taxes some states levy on removal of finite natural resources. In our view, there is no comparison since Nebraska ethanol plants produce energy from a renewable resource. Oil and coal resources will eventually be depleted. In our opinion, renewable energy has a long sustainable future, which will provide significant contributions to Nebraska’s economy.
As renewable energy technology evolves the energy gain and sustainability of ethanol and other renewable fuels will provide long term positive impact to Nebraska’s financial well being.
Nebraska, to our knowledge, does not currently impose any type of general purpose excise tax on processed agricultural products. We define ethanol as a processed agricultural product. Nebraska Corn Growers Association members do not believe any new general purpose excise tax on agricultural commodities or processed products is acceptable.
The Nebraska Corn Growers Association has supported ethanol production incentives as a means to build Nebraska’s ethanol industry. This support has involved funding these incentives with a check-off on Nebraska corn matched by general fund dollars.
We support corn check-offs as they provide a means for our industry to self-finance the creation of new markets and demand for corn.
Nebraska’s corn producers are committed to share funding responsibility for the current ethanol production incentive program through a check-off. It may be tempting to think our obligation could be shifted to someone else. However, the fact is corn would still fund the incentive. As noted earlier, ethanol producers will most likely reflect the new excise tax in lower bids for corn. An additional consequence will be a narrowing of the base for collecting the funds, since only corn purchased by the ethanol producers will be directly affected.
Our objection to LB 701 and the Water Resources Cash Fund concerned the use of a corn check-off to provide funds for a general state obligation. Nebraska’s water issues and obligations affect the entire state and therefore require input and financial commitment from a state wide base. As previously noted, Nebraska corn check-offs are self-financed, self-help programs voluntarily established to create new markets and new demands. Our Nebraska corn check-offs were never, by either legislative or producer intent, meant to fund general obligations of the State of Nebraska.
Provisions of LB 946 relating to funding of the Water Resources Cash Fund do not resolve our concerns. Corn producers will still be providing a substantial portion of the funding only through a narrower base.
The Nebraska Corn Growers Association members ask that the Revenue Committee not advance LB 946 out of committee to general file.
