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. 

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 Emiel FeinsteinLawmakers feel pressure on guns Feinstein: Trump must urge GOP to pass bump stock ban Florida lawmakers reject motion to consider bill that would ban assault rifles MORE's (D-Calif.) measure – which mirrors a bill she offered with Sen. Tom CoburnThomas (Tom) Allen CoburnPaul Ryan should realize that federal earmarks are the currency of cronyism Republicans in Congress shouldn't try to bring back earmarks Republicans should know reviving earmarks is a political nightmare 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 Mason ReidWATCH: There is no Trump-Russia collusion and the media should stop pushing this The demise of debate in Congress ‘North by Northwest,’ the Carter Page remake 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 Randolph ThuneFlake to try to force vote on DACA stopgap plan Congress punts fight over Dreamers to March The 14 GOP senators who voted against Trump’s immigration framework MORE (R-S.D.) and Amy KlobucharAmy Jean KlobucharOvernight Health Care: Trump eases rules on insurance outside ObamaCare | HHS office on religious rights gets 300 complaints in a month | GOP chair eyes opioid bill vote by Memorial Day Overnight Regulation: Trump to take steps to ban bump stocks | Trump eases rules on insurance sold outside of ObamaCare | FCC to officially rescind net neutrality Thursday | Obama EPA chief: Reg rollback won't stand Dems seek reversal of nursing home regulatory rollback 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 Dean BluntRussian assault on 'American idea' enables Trump to take tough action Eleven lawmakers have used campaign funds to pay NRA dues: report Kimmel writer tweets amount NRA has given lawmakers in response to shooting prayers MORE (Mo.), Saxby ChamblissClarence (Saxby) Saxby ChamblissLobbying World Former GOP senator: Let Dems engage on healthcare bill OPINION: Left-wing politics will be the demise of the Democratic Party MORE (Ga.), Daniel Coats (Ind.), Thad CochranWilliam (Thad) Thad CochranOvernight Finance: Breaking down Trump's budget | White House finally releases infrastructure plan | Why it faces a tough road ahead | GOP, Dems feud over tax-cut aftermath | Markets rebound McConnell tees up budget deal McConnell urging Mississippi gov to appoint himself if Cochran resigns: report MORE (Miss.), Chuck GrassleyCharles (Chuck) Ernest GrassleyPavlich: The claim Trump let the mentally ill get guns is a lie Congress fails miserably: For Asian-Americans, immigration proposals are personal attacks Grassley, Dems step up battle over judicial nominees MORE (Iowa), John HoevenJohn Henry HoevenSenate Republicans call on Trump to preserve NAFTA GOP anxious with Trump on trade GOP lawmakers to Trump: Don't fire Mueller MORE (N.D.), Mike JohannsMichael (Mike) Owen JohannsFarmers, tax incentives can ease the pain of a smaller farm bill Lobbying World To buy a Swiss company, ChemChina must pass through Washington MORE (Neb.), Mark KirkMark Steven KirkHigh stakes as Trump heads to Hill Five things to watch for at Trump-Senate GOP meeting Giffords, Scalise highlight party differences on guns MORE (Ill.), Richard Lugar (Ind.), Jerry MoranGerald (Jerry) MoranFlake to try to force vote on DACA stopgap plan Congress punts fight over Dreamers to March The 14 GOP senators who voted against Trump’s immigration framework MORE (Kan.), Rob PortmanRobert (Rob) Jones PortmanCommittee chairman aims for House vote on opioid bills by Memorial Day Flake to try to force vote on DACA stopgap plan Congress punts fight over Dreamers to March MORE (Ohio), Pat RobertsCharles (Pat) Patrick RobertsOvernight Finance: Lawmakers, Treasury look to close tax law loopholes | Trump says he backs gas tax hike | Markets rise despite higher inflation | Fannie Mae asks for .7B Senators working on fix to agriculture provision in GOP tax law Trump budget would slash crop insurance funds for farmers MORE (Kan.) , John Thune (S.D.), and Roger WickerRoger Frederick WickerAt least Alzheimer’s research is bringing Washington together McConnell urging Mississippi gov to appoint himself if Cochran resigns: report Senate Republicans call on Trump to preserve NAFTA MORE (Miss.).

The ethanol industry fared better on a second vote. Lawmakers voted 41-59 against Sen. John McCainJohn Sidney McCainLawmakers worry about rise of fake video technology Democrats put Dreamers and their party in danger by playing hardball Trump set a good defense budget, but here is how to make it better 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.