Coburn spars with Norquist over tax breaks for ethanol

Sen. Tom Coburn (R-Okla.) ripped conservative activist Grover Norquist on Tuesday for defending tax breaks that benefit special interest groups. 

In a letter to Norquist, the president of Americans for Tax Reform, Coburn said a tax break for ethanol producers ultimately raised the tax burden for average taxpayers and should be done away with.

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Americans for Tax Reform quickly shot back with a letter to Coburn that accused the senator of misinterpreting its views of the ethanol tax credit, which it said it opposed. The group said it opposed Coburn’s amendment because he did not offset elimination of the tax break with a corresponding tax cut.

The unusual fight between two conservative heavyweights in the Republican party reflects tension over Coburn’s role in a group of lawmakers working on a possible deal to cut entitlement spending and reform the tax code.

Norquist, who hosts a weekly meeting of influential conservative activists in Washington, has warned Coburn not to embrace tax reforms that would result in a net tax increase.

In its response to Coburn on Tuesday, ATR took a shot at the senator’s support for recommendations by President Obama’s debt commission, which Coburn and other senators are now trying to turn into legislative language.

Ryan Ellis, tax policy director for the group, said its opposition to Coburn’s ethanol measure “has little to do with any specific deduction or credit and much to do with avoiding massive tax increases, such as those [Coburn] supported” on the debt commission. 

Coburn, as a member of Obama’s fiscal commission, voted for a proposal to raise $785 billion in new revenue over 10 years by wiping out niche tax breaks for an array of special interests. 

Ellis wrote that the debt commission proposal would have chopped away at the “whale-sized mortgage interest deduction, charitable deduction, state and local tax deduction, and the employer-provided healthcare exclusion.”

Tuesday’s GOP fireworks started with Coburn’s letter to Norquist’s group. 

“By opposing my amendment, you are defending wasteful spending and a de facto tax increase on every American,” Coburn, one of the Senate’s staunchest fiscal conservatives, wrote of the amendment he offered to small-business legislation pending on the Senate floor.

Coburn said Norquist’s defense of ethanol tax breaks demands “that Senate conservatives violate their consciences and support distortions in the tax code.”

Ellis fired back in a six-point letter that urged Coburn to change his amendment to include an offsetting tax cut for eliminating the ethanol break. He said the ATR Taxpayer Protection Pledge, in which lawmakers promise not to raise taxes, would be broken by Coburn’s amendment unless he included the offsetting tax cut. Coburn is one of 41 senators who have signed the pledge.

“According to the Joint Tax Committee, your amendment would increase taxes by $4.869 billion over the next two years,” Ellis wrote. “Repealing the ethanol credit is the right thing to do, but other taxes must be reduced in the same legislation by at least this much to prevent a net tax increase.”

Ellis also wrote that support for Coburn’s amendment was “inconsistent” with a promise to oppose “any net reduction or elimination of deductions and credits, unless matched dollar-for-dollar by further reducing tax rates.”

Norquist told The Hill recently that Coburn and other GOP senators in the talks on the debt commission had promised him that they would not support reform that had the net effect of increasing taxes.

“I’ve talked to the three guys in the room and they’ve promised not to vote [for] any tax increases,” Norquist said earlier this month.

But Coburn’s office disputed Norquist’s characterization of the conversation.

“Grover hears what he wants to hear. Dr. Coburn has been arguing for many years, in word and deed, that the problem is overspending, not under-

taxation. That said, he strongly disagrees with ATR’s belief that every distortion and corporate welfare subsidy in the tax code, such as that for ethanol, is a ‘tax cut’ that needs to be preserved,” said John Hart, Coburn’s communications director. 

“Trusting Washington to pick winners and losers in the tax code should be anathema to conservatives,” Hart added. “ATR’s odd definition of tax purity is an argument for tax deferment, tax complexity, more spending and unsustainable borrowing.”

Coburn told The Hill on Tuesday that he’s not going to shy away from a fight with conservative activists to do what he thinks is in the best interest of average taxpayers. He argues it’s not fair to require average families to pay more in taxes to fund narrow tax breaks that benefit specific industries.

“I don’t care what anybody in this town says, I’m going to do what I think is the best thing to help us as a country to get out of the various serious problems we’re in,” Coburn said.

He dismissed criticism of his efforts to eliminate special tax breaks as “background noise.”

“We got $1.3 trillion a year in tax expenditures; if we’re going to get out of trouble we have to adjust that,” he said. “Part of the deal is to try to reform the tax code to where it effectively drives capital to where it should be, rather than where [lawmakers] say it should be.”

Coburn’s stance has also sparked a fight with a fellow GOP member of the powerful Finance Committee: Sen. Chuck Grassley (Iowa).

Grassley opposes Coburn’s effort to kill the tax break for ethanol, which he says should be considered within the two committees of jurisdiction, the Energy and Natural Resources and Finance panels.

Grassley said it’s unfair to target ethanol during the floor debate of small-business legislation when the nuclear industry and wind and solar energy industries also benefit from special tax breaks.

“It’s easy for people to pick on ethanol because there’s so much ignorance about ethanol in this town,” he said.

Grassley agrees with ATR’s opposition to Coburn’s amendment “because it’s a tax increase.”

He argued that gasoline with ethanol in it is 10 to 12 cents cheaper per gallon than pure gasoline.

Grassley said he did not know whether Coburn’s amendment could muster enough votes to pass.