There is no federal tax incentive for ethanol. It varies by state. Illinois is a corn producing state, so their legislators want to please the corn producers. Iowa does the same thing, only they provide a choice. Buy ethanol blend or pay more for non ethanol blend. Although ethanol and mtbe both absorb water, this is not their purpose. It is to add octane numbers. This was done with tetraethyl lead back when these 50's vehicles were built, and that is what they were designed for.
