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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 FeinsteinDem senator seeks more time for 'due diligence' on Sessions nomination Senate sets date for hearings on Sessions's attorney general nomination Senators move to protect 'Dreamers' MORE's (D-Calif.) measure – which mirrors a bill she offered with Sen. Tom CoburnTom CoburnWill Trump back women’s museum? Don't roll back ban on earmarks Ryan calls out GOP in anti-poverty fight 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 ReidReid: Comey should be investigated in wake of Russia report Spokesman: NY Times ignored Reid's comments in pre-election story on Russia Senate passes dozens of bills on way out of town 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 ThuneOvernight Tech: Last-ditch effort to get Dem FCC commish confirmed | Facebook's Sandberg on fake news | Microsoft completes LinkedIn deal FCC chairman willing to resign to get colleague confirmed Overnight Tech: AT&T, Time Warner CEOs defend merger before Congress | More tech execs join Trump team | Republican details path to undoing net neutrality MORE (R-S.D.) and Amy KlobucharAmy KlobucharThe Hill's 12:30 Report Cures bill clears first Senate hurdle The Hill's 12:30 Report 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 BluntSanders: GOP blocked 'Trump proposal' to lower drug prices McConnell: We'll start Obamacare repeal on day one Could bipartisanship rise with Trump government? 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 CochranGOP senators voice misgivings about short-term spending bill Trump's wrong to pick Bannon or Sessions for anything Bottom Line MORE (Miss.), Chuck GrassleyChuck GrassleyDem senator seeks more time for 'due diligence' on Sessions nomination Senate sets date for hearings on Sessions's attorney general nomination Mnuchin, Price meet with GOP senators MORE (Iowa), John HoevenJohn HoevenSenate GOP to Obama: Stop issuing new rules Feds deny permit for Dakota Access pipeline Dem senator to meet with Trump 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 KirkJuan Williams: McConnell won big by blocking Obama Battle for the Senate: Top of ticket dominates The untold stories of the 2016 battle for the Senate MORE (Ill.), Richard Lugar (Ind.), Jerry MoranJerry MoranSenate GOP to Obama: Stop issuing new rules Overnight Tech: Bill protecting online reviews heads to Obama | New addition to FCC transition team | Record Cyber Monday Overnight Finance: Trump expected to pick Steven Mnuchin for Treasury | Budget chair up for grabs | Trump team gets deal on Carrier jobs MORE (Kan.), Rob PortmanRob PortmanSenate passes dozens of bills on way out of town Senators to Trump: Get tough on Russia over Ukraine John Glenn dies at 95 MORE (Ohio), Pat RobertsPat RobertsSenate GOP to Obama: Stop issuing new rules GOP debates going big on tax reform Memo to the LGBT community: Donald Trump is not your enemy MORE (Kan.) , John Thune (S.D.), and Roger WickerRoger WickerRepublican wins La. Senate runoff in final 2016 race FCC chairman willing to resign to get colleague confirmed GOP eager to see Harry Reid go MORE (Miss.).

The ethanol industry fared better on a second vote. Lawmakers voted 41-59 against Sen. John McCainJohn McCainSunday shows preview: Trump sits down with Fox McCain: Tillerson ties to Putin a 'matter of concern' Second Dem calls for probe into Russian election involvement 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.