Vote to end ethanol subsidies revives Coburn-Norquist tax battle

The amendment is strongly backed by the fiscally conservative Club for Growth, and the proposal has received support in the past from groups like the Heritage Foundation.

“Today’s way of doing business is a tax increase on anyone who can’t hire a tax lobbyist or make large donations to special interest groups in Washington,” Coburn said in a Friday statement. “Taxpayers are tired of this game and expect us to eliminate wasteful special interest spending in all of its forms.”

But Norquist has expressed concern that the Oklahoma senator’s measure – which does not offset the revenues from the ethanol subsidy – is a stalking horse for a broader push to find new tax revenue, something Coburn is calling for more and more to help close yawning budget gaps.

“His goal is to try and say: ‘Ha, ha, see in some cases it’s OK to eliminate credits and deductions and not offset it,’” the Americans for Tax Reform president told The Hill on Friday. “And then he’ll come back with $2 trillion in tax increases and try to say that’s somehow not a tax increase. It’s wrong on so many levels.”

The scheduled ethanol vote comes as Coburn and Norquist have sniped at each other consistently in the recent weeks and months, in large part over Coburn’s participation in the Gang of Six.

The Oklahoma senator has since taken a sabbatical from that group, which was using President Obama’s fiscal commission as a guidepost for a deficit-reduction plan. But his stance on raising new revenue still puts him at odds with Norquist and practically all congressional Republicans.

Norquist’s group sponsors a Taxpayer Protection Pledge, which has been signed by the vast majority of congressional Republicans, including Coburn. The pledge states that, among other things, the elimination of a tax credit or deduction must be paired with a corresponding tax cut.

With that in mind, ATR announced Friday that it was backing a proposal from Sen. Jim DeMint (R-S.C.), which would eliminate the estate tax and more than make up for the amount in the ethanol subsidy.

DeMint, who also announced Friday that he would support Coburn’s ethanol amendment, also proposes to get rid of a mandate that requires that billions of gallons of renewable fuels have to be blended into the American fuel supply by 2022.

“Unfortunately, Washington’s bad ethanol policies don’t end with just subsidies and tariffs,” DeMint said in a statement. “We must also repeal the mandate, which my amendment would do.”

In a statement, ATR said DeMint’s proposal “fills in the gaps” left by Coburn’s amendment, which it called “half-baked” and a tax increase on its own. The group also said that lawmakers who backed both the Coburn and DeMint proposals would not be seen as having broken the "Taxpayer Protection" pledge.

Norquist also told The Hill that he believes the Coburn proposal is largely symbolic because it does not propose any alterations to the renewable fuels standard.

But John Hart, a spokesman for Coburn, told The Hill over e-mail that the senator would “likely” vote for the DeMint amendment, if and when it hit the floor, and that Coburn opposed the mandate.

“We’re taking it one step at a time,” Hart said.

The Club for Growth, in a release saying it was naming the Coburn amendment a key vote, struck similar notes.

“It’s time to end these economically irrational provisions for ethanol, which should be a first step in eliminating all government subsidies for energy production, including the abolition of government mandates on renewable fuel use,” the conservative group said.

Of course, it remains to be seen how the Coburn amendment actually fares on Tuesday. While many conservatives may stridently oppose the ethanol credit, the Senate is still controlled by Democrats, and a fair number of farm state Republicans still back the subsidy.