Senate Passes Ethanol Tax Credit Repeal

The Senate voted Thursday to approve an amendment to repeal a tax credit for ethanol blenders.

The amendment, co-sponsored by Sen. Tom Coburn, R-Okla., and Dianne Feinstein, D-Calif., failed on Tuesday when Coburn tried to use an unusual procedural maneuver to secure a vote on the measure, which upset some of his Senate colleagues (see The Problem with Repealing Tax Credits). On Thursday, however, the amendment passed by a margin of 73 to 27. Forty Democrats and 33 Republicans voted in favor of the measure, which would repeal a 45 cents a gallon tax credit for ethanol and a 54 cents a gallon tariff on imported ethanol.

The vote to repeal tax credits was an unusual one for Republican lawmakers, who are generally opposed to raising taxes. Grover Norquist, the president of the influential advocacy group Americans for Tax Reform, which has many lawmakers on record as signing a pledge not to increase taxes, said that Republican lawmakers could vote for the Feinstein-Coburn amendment and not violate the pledge as long as they also voted for an amendment introduced by Sen. Jim DeMint, R-S.C., which eliminates the estate tax. The DeMint amendment had not been voted on as of Thursday.

The amendment would repeal the Volumetric Ethanol Excise Tax Credit, also known as the Blenders’ Credit. The tax credit, which is used by companies that blend ethanol with gasoline, was due to expire at the end of the year in any case. However, Coburn said it would save taxpayers $6 billion a year, or because the year is already half over, $3 billion.

“Today’s vote was a major victory for taxpayers and a positive step toward a serious deficit reduction agreement, which is our only hope of averting a debt crisis,” he said in a statement.  “An overwhelming bipartisan majority of senators embraced pro-growth tax reform while rejecting the parochial politics that so often paralyze the Senate. The best way to reduce our crushing $14.3 trillion debt is by reducing wasteful spending a billion dollars at a time. This amendment saves taxpayers $3 billion. In light of today’s lopsided vote, I urge my colleagues in the House to eliminate this wasteful earmark and tariff at their earliest opportunity.”

However, the prospects for repealing the tax credit in the House are shaky as it is opposed by many farm state lawmakers whose constituents benefit from the tax credits for corn-based fuel additives. Sen. Charles Grassley, R-Iowa, who has led opposition to the measure, said on the Senate floor that the bill was not likely to even be voted on in the House.

“These amendments won’t save the taxpayer any money, because they stand little chance of being enacted,” he said. “Even if the amendments were to pass today they won’t get out of this chamber. This bill is not likely to be taken up by the House. If a revenue amendment is attached to this bill, it will be blue-slipped by the House. The Constitution requires that revenue measures originate in the House. So, this bill, with these amendments, is dead on arrival. It’s also dead on arrival at the White House. They indicated in a statement that President Obama opposes repealing the incentives and is open to new approaches that meet today’s challenges and save taxpayers money. The votes at 2 o’clock today are a fruitless exercise. This is political theater. We’ve already had this vote, and it was defeated 40 to 59.”

However, the tax credit repeal may be included as part of a larger deficit reduction deal. Vice President Joe Biden has been talking with a group of six lawmakers from both sides of the aisle, known as the Gang of Six, including Coburn, about a deficit reduction deal. An agreement needs to be struck in time to lift the debt ceiling before early August, when the federal government runs the risk of defaulting on some of its obligations.

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