“Unfortunately, this is not the first time your organization has defended distortions in the tax code. In 2009, you defended a $246 million tax earmark for Hollywood movie producers. You opposed my amendment on the grounds that it was a “tax increase,” Coburn said.
The stakes of the issue go beyond ethanol however.
The feud between Coburn and Norquist erupted last December when Coburn voted for the president’s fiscal commission plan, which proposed eliminating special interest tax breaks in order to lower rates and raise some revenue for deficit reduction.
Coburn is involved in Gang of Six takes now over putting the commission recommendations into law. Getting ATR to change its interpretation of the eliminating tax earmarks could open the door wider for a bipartisan grand bargain on the deficit.
Coburn used the letter to make the larger argument that eliminating tax earmarks is actually a spending cut, and not a tax increase.
“Rather than demanding that Senate conservatives violate their consciences and support distortions in the tax code that increase spending and maintain Washington’s power over taxpayer’s lives, your organization should assist our efforts. Calling for the elimination of tax earmarks without qualifications would be a good start,” Coburn wrote. “Continuing to issue blanket defenses of all tax expenditures is a profoundly misguided embrace of progressive, activist government and a strategy for tax complexity, tax deferment, excessive spending and unsustainable deficits.”
In a response letter Americans for Tax Reform President Ryan Ellis wrote back Tuesday that ATR "opposes the ethanol tax credit, and always has."
ATR however wants Coburn to change his amendment to that it includes a tax cut to ensure that the amendment does not increase revenue going into the Treasury.
Ellis said "the best policy outcome is to eliminate the ethanol tax credit in a way that leaves money in the hands of taxpayers, not increases the amount of money going to Washington for the Appropriations Committees to spend. Your amendment as written to repeal the ethanol credit (unfortunately) does the latter."
He also emphasized that ATR in concerned about the fiscal commission approach.
"Please understand that our position on this matter has little to do with any specific deduction or credit and much to do with avoiding massive tax increases, such as those you supported in the Simpson-Bowles-Obama commission," he said.
The letter notes that the plan "would have not simply eliminated guppy tax credits like ethanol, but also chopped away at the whale-sized mortgage interest deduction, charitable deduction, state and local tax deduction, and the employer-provided healthcare exclusion. The commission’s own score indicated that their failure to cut rates sufficiently in concert with these moves resulted in a ten-year net tax hike of over $1 trillion."