Senate kills off ethanol tax credits in possible break with tax pledge

The Senate voted 73-27 Thursday to kill a major tax break that benefits the ethanol industry, handing a political win to a bipartisan group of lawmakers that call the incentive needless and expensive.



The vote also could have ramifications on future votes to reduce the deficit. Much of the GOP conference supported Feinstein's bill even though it does not include another tax break to offset the elimination of the ethanol tax credit. 

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As such, the vote could also represent a setback for influential conservative Grover Norquist, head of Americans for Tax Reform (ATR), who said a vote for the plan would violate the anti-tax pledge most Republicans have signed unless paired with a separate tax-cutting amendment.

Thirty-three Republicans and 38 Democrats supported the measure along with both of the chamber's Independents, who caucus with Democrats. 

Fourteen Republicans and 13 Democrats voted against it.

Sen. Dianne FeinsteinDianne FeinsteinHotel lobby cheers scrutiny on Airbnb GOP platform attempts middle ground on encryption debate Week ahead: Encryption fight poised to heat up MORE's (D-Calif.) measure – which mirrors a bill she offered with Sen. Tom CoburnTom CoburnThe Trail 2016: Words matter Ex-Sen. Coburn: I won’t challenge Trump, I’ll vote for him Coburn: I haven't seen 'self-discipline' from Trump MORE (R-Okla.) – was approved despite opposition from Corn Belt lawmakers who are seeing political support for ethanol wane.



Coburn said the vote sends "a good signal" to ongoing talks to raise the nation's debt ceiling while reducing deficits. He also said he was sure it would be on the table in the deficit-reduction talks led by Vice President Biden. 

Feinstein's amendment to an economic development bill would quickly end the credit of 45 cents for each gallon of ethanol that fuel blenders mix into gasoline.
The credit led to $5.4 billion in foregone revenue last year, according to the Government Accountability Office.

The amendment also ends the 54-cent per gallon import tariff that protects the domestic ethanol industry.



Thursday’s vote was a turnaround from Tuesday, when just 40 senators voted for Coburn’s identical amendment, well shy of the 60 needed to advance it.

But the politics of Tuesday’s battle were clouded by Democratic anger at Coburn’s surprise procedural move last week that set up the vote. Democratic leaders had whipped against the amendment heading into Tuesday’s vote, but two aides said they did not do so ahead of the vote Thursday.

The vote is also tied up in a battle among conservatives about whether Republicans who voted with Feinstein and Coburn had abandoned ATR’s anti-tax pledge that most Republicans have signed. Thirty-four Republicans voted in favor of Coburn's amendment on Tuesday, which signaled many Republicans saw the ethanol tax credit as wasteful and were willing to kill it.

The Club for Growth lobbied in favor of the measure and said senators who voted for it deserved credit for ridding the tax code of "market-distorting tax credits and subsidies."

Norquist had said voting for Coburn would not be a violation of the tax pledge if the amendment paired with Sen. Jim DeMint’s (R-S.C.) amendment that would repeal the estate tax and end the national renewable fuels mandate. But a vote on DeMint's amendment has not been scheduled. 

"As long as the Taxpayer Protection Pledge signers that voted for the Feinstein/Coburn amendment also vote for the DeMint amendment, they will be in keeping wit the pledge they made to their constituents," ATR said in a statement. "Taken together, this elimination of favoritism toward ethanol is not a violation of the Taxpayer Protection Pledge."

Senate Majority Leader Harry ReidHarry ReidDems put immigration front-and-center on convention's first day Dem ad blasts Indiana senate candidate on Social Security Super-PAC targets Portman on trade MORE (D-Nev.), on the Senate floor Wednesday night, said the agreement to have a vote on the Feinstein plan “does not preclude the Senate from considering his amendment.”

DeMint, an ally of Norquist, pledged Thursday to use every tool possible to secure a vote on his amendment. 

The politics of ethanol are more regional than partisan, and ethanol backers are floating plans aimed at thwarting efforts to kill the incentives outright. 

Sens. John ThuneJohn ThuneTim Kaine backs call to boost funding for Israeli missile defense FCC chief pushes phone companies to offer free robocall blocking How the new aviation law will affect your travel MORE (R-S.D.) and Amy KlobucharAmy KlobucharTim Kaine backs call to boost funding for Israeli missile defense Senate Dems push Obama for more Iran transparency Senators launch broadband caucus MORE (D-Minn.) – joined by other ethanol allies – are floating legislation that would end the 45-cent per gallon ethanol blender’s credit (which along with the import tariff is slated to expire at year’s end), but maintain a smaller and “variable” blender’s credit for three years when oil prices are below certain levels.



It would steer some savings from ending the credit to deficit reduction while also extending credits for cellulosic ethanol production, small ethanol producers, and installing alternative fuel pumps.

Despite the vote, Feinstein is still seeking to negotiate with industry supporters. Feinstein said that she and Coburn are meeting with Thune and Klobuchar, noting they are "trying to see if there is a compromise in this thing that does what we need to do vis-a-vis deficit reduction and in some way eases it a bit."

Coburn said Reid had offered ethanol supporters a vehicle to try and move a plan that would seek to boost ethanol infrastructure and cellulosic ethanol, a next-wave fuel.

While the White House supports including tax increases as part of a plan to reduce the budget deficit, it supported the ethanol tax credits. 

It issued a statement this week against killing the blender’s credit outright while acknowledging that reforms are needed. 

“With respect to incentives, the administration is open to new approaches that meet today’s challenges and save taxpayers money. We oppose a straight repeal of the Volumetric Ethanol Excise Tax Credit,” White House spokesman Clark Stevens said this week.

The 14 Republican senators voting against Feinstein's amendment were Sens. Roy BluntRoy BluntOvernight Energy: Officials close in on new global emissions deal 40 senators seek higher biodiesel mandate Top Dem Senate hopefuls to skip convention MORE (Mo.), Saxby ChamblissSaxby ChamblissWyden hammers CIA chief over Senate spying Cruz is a liability Inside Paul Ryan’s brain trust MORE (Ga.), Daniel Coats (Ind.), Thad CochranThad CochranWhy a bill about catfish will show whether Ryan's serious about regulatory reform Capitol locked down for second time in a week This week: Congress eyes the exits in dash to recess MORE (Miss.), Chuck GrassleyChuck GrassleyTop Dem Senate hopefuls to skip convention Election to shape Supreme Court Why one senator sees Gingrich as Trump's best VP choice MORE (Iowa), John HoevenJohn HoevenMajority of GOP senators to attend Trump convention Death threats against senators remained on Twitter for 2 weeks Senate panel approves funding boost for TSA MORE (N.D.), Mike JohannsMike JohannsTo buy a Swiss company, ChemChina must pass through Washington Republican senator vows to block nominees over ObamaCare co-ops Revisiting insurance regulatory reform in a post-crisis world MORE (Neb.), Mark KirkMark KirkTim Kaine backs call to boost funding for Israeli missile defense NBA pulls All-Star Game from NC over bathroom law GOP groups scale back support for Sen. Johnson MORE (Ill.), Richard Lugar (Ind.), Jerry MoranJerry MoranMeet the rising GOP star who already enrages the left GOP warming up to Cuba travel Senate clears FAA authorization bill MORE (Kan.), Rob PortmanRob PortmanUnion group backs GOP Sen. Portman in Ohio race Dem ad blasts Indiana senate candidate on Social Security The Trail 2016: Trump’s big night MORE (Ohio), Pat RobertsPat RobertsMeet the rising GOP star who already enrages the left Senators ask IRS to issue guidance to help startups GOP makes new push on wildfire bills MORE (Kan.) , John Thune (S.D.), and Roger WickerRoger WickerTop GOP senator: Trump will have little effect on Senate races GOP senators to donors: Stick with us regardless of Trump Majority of GOP senators to attend Trump convention MORE (Miss.).

The ethanol industry fared better on a second vote. Lawmakers voted 41-59 against Sen. John McCainJohn McCainTim Kaine backs call to boost funding for Israeli missile defense Booker: 'I love you, Donald Trump' Syria activists cheer Kaine pick MORE’s (R-Ariz.) amendment to prohibit use of federal funds to build ethanol blender pumps or storage facilities.

This story was last updated at 4:11 p.m.