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 FeinsteinFeinstein: Trump Jr. will be subpoenaed if he refuses to testify The next battle in the fight against human trafficking Trump's FBI nominee passes committee, heads to full Senate MORE's (D-Calif.) measure – which mirrors a bill she offered with Sen. Tom CoburnTom CoburnCongress, stop using our nation's military policy for political purposes Congress must rid itself of political 'pork' to preserve its integrity 'Path of least resistance' problematic for Congress 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 ReidConservative Senate candidate calls on GOP to end filibuster Ex-Reid aide: McConnell's 'original sin' was casting ObamaCare as 'partisan, socialist takeover' GOP faces growing demographic nightmare in West 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 ThuneCornyn: Knowing health plan ahead of vote is 'luxury we don't have' Sen. Thune: McCain ‘a hero' to ‘millions’ GOP reverses course on healthcare MORE (R-S.D.) and Amy KlobucharAmy KlobucharDem senator: Trump acting like he's still on ‘The Apprentice’ The next battle in the fight against human trafficking Dems see huge field emerging to take on Trump 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 Healthcare: Trump plays hardball on ObamaCare | Senators revive negotiations | CBO says repeal without replace would cost 32M insurance White House working with moderates on new Medicaid proposal Senate GOP revives negotiation over ObamaCare repeal and replace MORE (Mo.), Saxby ChamblissSaxby ChamblissFormer GOP senator: Let Dems engage on healthcare bill OPINION: Left-wing politics will be the demise of the Democratic Party GOP hopefuls crowd Georgia special race MORE (Ga.), Daniel Coats (Ind.), Thad CochranThad CochranOvernight Finance: GOP offers measure to repeal arbitration rule | Feds fine Exxon M for Russian sanctions violations | Senate panel sticks with 2017 funding levels for budget | Trump tax nominee advances | Trump unveils first reg agenda Senate committee ignores Trump, House budgets in favor of 2017 funding levels Overnight Finance: CBO finds 22M more uninsured under Senate health bill | GOP agrees ObamaCare taxes must go | Supreme Court to look at Dodd-Frank whistleblower protections | More tax reform hearings | Green light for partial travel ban | MORE (Miss.), Chuck GrassleyChuck GrassleyFeinstein: Trump Jr. will be subpoenaed if he refuses to testify The next battle in the fight against human trafficking The Hill's 12:30 Report MORE (Iowa), John HoevenJohn HoevenMcCain diagnosis looms over GOP healthcare talks This week: ObamaCare repeal faces latest setback in Senate Centrist Republicans push back on GOP healthcare bill  MORE (N.D.), Mike JohannsMike JohannsLobbying World To buy a Swiss company, ChemChina must pass through Washington Republican senator vows to block nominees over ObamaCare co-ops MORE (Neb.), Mark KirkMark KirkMcConnell: Senate to try to repeal ObamaCare next week GOP senator: Not 'appropriate' to repeal ObamaCare without replacement GOP's repeal-only plan quickly collapses in Senate MORE (Ill.), Richard Lugar (Ind.), Jerry MoranJerry MoranThe Memo: Trump tries to bend Congress to his will Tensions linger between Trump and GOP lawmakers Trump plays hardball on ObamaCare repeal MORE (Kan.), Rob PortmanRob PortmanRegulatory experts push Senate leaders for regulatory reform Conservative group to give GOP healthcare holdouts ‘Freedom Traitors Award’ Source: Senate leaders to offer 0 billion to win over moderates MORE (Ohio), Pat RobertsPat RobertsOvernight Healthcare: McConnell warns Senate not to block repeal debate | Insurers knock Cruz proposal | WH tries to discredit CBO | Lawmakers propose .1B NIH funding boost Trump: I’ll be ‘very angry’ if Senate doesn’t pass ObamaCare repeal bill Trump: Putin preferred Clinton in the White House MORE (Kan.) , John Thune (S.D.), and Roger WickerRoger WickerTrump Navy secretary nominee moves forward to Senate vote 355-ship Navy not a must under Trump's secretary nominee GOP senator: 'Everybody wants to get to yes' on healthcare MORE (Miss.).

The ethanol industry fared better on a second vote. Lawmakers voted 41-59 against Sen. John McCainJohn McCainOvernight Defense: Trump gets briefing at Pentagon on ISIS, Afghanistan | Senate panel approves five defense picks | Senators want Syria study in defense bill Schwarzenegger tweets to McCain: 'You'll be back' Trump called McCain to wish him well after cancer diagnosis 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.