Senate keeps $6B in subsidies, but 34 GOPers side with Coburn

Thirty-four Senate Republicans voted Tuesday to advance a proposal eliminating a $6 billion ethanol tax break, which one GOP leader said struck a blow against the Taxpayer Protection Pledge.

But the measure fell 20 votes short, 40-59, as most Democrats voted against proceeding.

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The vote came on an amendment sponsored by Sen. Tom Coburn (R-Okla.) to eliminate a 45-cent tax break given to refiners for every gallon of ethanol they blend with gasoline. 

The proposal did not offset the cost of the increase, an apparent violation of Americans for Tax Reform’s (ATR) tax pledge requiring signatories to oppose “any net reduction or elimination of deductions and credits, unless matched dollar for dollar by further reducing tax rates.” 

The Joint Committee on Taxation estimated Tuesday that Coburn’s amendment would raise $2.4 billion in tax revenue over the rest of this year.

Tuesday’s vote was significant because critics of the pledge claim it is getting in the way of a possible bipartisan deal on cutting spending while simultaneously raising the nation’s debt ceiling. All but seven Republicans in the Senate and six in the House have signed the ATR pledge.  

ATR President Grover Norquist scrambled in recent days to deflect damage to the integrity of the pledge by winning a promise from GOP leadership that it would push for a second amendment, sponsored by Sen. Jim DeMint (R-S.C.), that would offset the higher tax burden of Coburn’s proposal. 

Ryan Ellis, tax policy director at ATR, said Tuesday’s vote did not violate the pledge because Republican leaders had agreed to link the Coburn and DeMint amendments. Ellis said ATR often gives exemptions to such linked votes at the state level, though rarely at the federal level.

DeMint’s amendment would more than salve the sting of higher ethanol taxes by completely eliminating the tax on inheritances. It would also take a step further by ending the federal ethanol mandate, which Coburn’s amendment did not do. 

Norquist gave GOP senators the green light to vote for Coburn’s amendment as long as they also promised to support the DeMint amendment, averting what would have otherwise been a complete loss. 

Some senators questioned what impact this exception would have on the effectiveness of the pledge. 

“This interpretation of the pledge is very different from anything I’ve seen before, and it seems like they’re trying to contort it to keep everyone compliant with the pledge, but it does change the rules significantly,” said Sen. John Thune (S.D.), chairman of the Senate Republican Policy Committee, a defender of tax breaks for ethanol blending. 

“Usually when you have an amendment, the [tax increase] has to be offset within the amendment; you can’t say, ‘I’m going to vote for this and, oh yeah, I’ll offer a tax repeal amendment over here that cuts taxes,’ ” Thune said. 

Ellis disagrees with Thune.

“Every Republican who voted for the Coburn amendment would have voted for the DeMint amendment, so there’s no disagreement between us and the Republican senators on policy,” he said.

Ellis said Republicans would have had a chance to vote on the DeMint measure had the procedural motion passed. But Senate Majority Leader Harry Reid (D-Nev.) controls the schedule, and the vote is not for certain.

Most Republican leaders voted for Coburn’s measure, including Sens. Mitch McConnell (Ky.), Lamar Alexander (Tenn.) and John Cornyn (Texas). 

DeMint’s amendment, meanwhile, is not yet scheduled for a vote. 

While ATR has expressed major concerns with the Coburn language, the conservative-leaning Club for Growth strongly endorsed Coburn’s bill and announced this week it would “key-vote” the roll call vote.

Norquist said he allowed the rare exception because many Republicans were misinformed. He said many voted with Coburn because they oppose the federal government propping up ethanol but didn’t realize Coburn’s measure did not eliminate the federal ethanol mandate. 

He said it would have required a multimillion-dollar advertising campaign to combat what he called Coburn’s disinformation campaign. 

“The only reason this came up this way is that Coburn twisted this [all the] way around into a pretzel,” Norquist said. “I would either have to spend $20 million educating the world about Coburn’s phony bill or do this. This is the only time someone with previous conservative cred is trying to sneak a tax increase through.” 

The amendment went down because Democrats, rallied by Democratic Whip Dick Durbin (Ill.), opposed it. Only six members of the Democratic Conference supported the measure, including politically vulnerable Sens. Joe Manchin (W.Va.) and Jon Tester (Mont.). Democrats said earlier this week that Coburn hijacked Senate procedures by forcing a vote on his bill.

Sen. Ben Cardin (D-Md.), who introduced the measure with Coburn in March, voted no on Tuesday. 

While 34 Republicans backed Coburn, 13 Republicans, all from farm states, voted to block the elimination of the tax break. Sens. Olympia Snowe (R-Maine) and Orrin Hatch (R-Utah), who could face primary challenges, voted with Coburn. Sen. Dick Lugar (R-Ind.), who will face a primary challenge, voted no.  

Coburn, who has publicly feuded with Norquist over the issue, claimed victory. 

“That’s 34 Republicans that are willing to say this is more important than a signed pledge to ATR,” he told reporters following the vote. 

A statement from ATR said the Senate had missed an opportunity to kill the ethanol subsidy. The statement criticized Coburn for insisting on an amendment that did not include offsetting tax relief in addition to the elimination of the ethanol tax credits. 

Coburn argued the tax break benefited major oil companies that sell gasoline blended with ethanol. He asserted Norquist’s orthodoxy was so rigid it would make it difficult to lower deficits by eliminating wasteful tax breaks, which Coburn argued came at the expense of other taxpayers. 

Thune, Mike Johanns of Nebraska and Chuck Grassley of Iowa, who all voted against Coburn, said the amendment, if enacted, could raise fuel prices. 

“Why would anyone prefer less energy production?” asked Grassley. “We should all be on the same side of more domestic-produced energy.” 

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Republicans who supported the amendment argued the country could no longer afford the high price of the ethanol tax credits. 

“This is going to be a historic vote that sends a message to the American people,” Coburn said. “Either the people in Washington get it and are going to stop wasting money on programs that they don’t need to waste money on, and they’re going to start acting in the best long-term interests of the country … or they’re not.” 

Freshman Sen. Pat Toomey (Pa.), who was one of the 34 Republicans who voted yes, said his differences with Norquist are “subtle,” because he also favors the DeMint amendment.

“I am not interested in raising taxes,” Toomey said. “But I am interested in ending ethanol subsidies.”

Sen. Richard Burr (R-N.C.), who also voted with Coburn, said that he thought “we need to get most, if not all, of the federal subsidies out of the system if we’re going to get the fiscal direction of the country in the right place.

“Grover Norquist can say what he wants to, but I would disagree with him on this,” Burr added. 

Ben Geman, Bernie Becker and Andrew Restuccia contributed to this report, which was first posted at 2:45 and updated at 5:45 p.m. and 8:16 p.m.