Most of the ethanol is used as E10 not as E85, much less than 25%. Besides you have to compare the energy produced not with gasoline but with MBTE and other clean air mandated additives.
Instead of 25% less mileage you are talking more like 3% less mileage so maybe it does work out to a net savings.
Ok, then it should work without the tax payers footing part of the bill, remove the subsidy.