Senate GOP splits on axing ethanol subsidy

Senate Republican leaders are divided over a proposal to eliminate a $6 billion annual subsidy for ethanol that anti-tax activists have labeled a tax increase.

The Senate is scheduled to vote on the issue Tuesday, and the outcome could have implications for the future of other niche tax breaks that could be eliminated in a broader deficit-reduction package.

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The proposal, sponsored by Sen. Tom CoburnThomas (Tom) Allen CoburnThe Hill's Morning Report — Presented by PhRMA — Worries grow about political violence as midterms approach President Trump’s war on federal waste American patients face too many hurdles in regard to health-care access MORE (R-Okla.), would eliminate the 45-cent ethanol tax credit for refiners and gas blenders. It would also scrap the 54-cent tariff on imported ethanol. 

The fight has broken down largely along geographic lines, with farm-state Republicans clashing with those whose states don’t have major corn-growing interests. 

The money saved would go toward deficit reduction, flying in the face of the Americans for Tax Reform’s (ATR) Taxpayer Protection Pledge, which calls for the elimination of tax breaks to be offset with other tax cuts. All but 13 Republicans in Congress have signed the pledge, including seven GOP senators. 

If a majority of Republicans vote for Coburn’s amendment, it would start to erode the nearly airtight opposition that ATR has been able to maintain against any tax increases that aren’t offset by other cuts. 

Democratic strategists see ATR’s pledge as a major obstacle to eliminating special corporate tax breaks in deficit-reduction talks. 

Senate Republican Leader Mitch McConnellAddison (Mitch) Mitchell McConnellDemocrats seize Senate floor to protest gun inaction: 'Put up or shut up' Democrats press for action on election security Hillicon Valley: Election security looms over funding talks | Antitrust enforcers in turf war | Facebook details new oversight board | Apple fights EU tax bill MORE (Ky.) has stayed quiet about whether to repeal the tax break, but his deputy, Sen. Jon Kyl (R-Ariz.), supports eradicating it. 

“I’m absolutely supporting what Coburn is trying to do,” Kyl told reporters Monday. 

Kyl, who is representing Senate Republicans in the debt negotiations led by Vice President Biden, is not shying away from a clash with ATR.

“I understand that their view is that if any taxpayer would pay more money it would be a tax increase,” Kyl said of Grover Norquist’s group. “My response is, what if we gave a credit to the most unproductive and vile character we can think of — would you be opposed to repealing that special tax preference?”

Kyl, a member of the Finance Committee who is not seeking reelection, said he’s not saying that ethanol producers are vile characters. However, he stressed that not all tax cuts are sacrosanct. 

“We should not be picking winners and losers, and if we favor one taxpayer, great as that taxpayer might be, then we’ve got the full force of the federal government behind the special treatment of that taxpayer,” he said.

Sen. Susan CollinsSusan Margaret CollinsThe Hill's Morning Report - Trump takes 2020 roadshow to New Mexico The 13 Republicans needed to pass gun-control legislation Congress passes bill to begin scenic byways renaissance MORE (R-Maine) said she agrees with Coburn and panned the ethanol subsidy for a fuel that is “causing land conversion for corn production, commodity and food prices to rise and is barely putting a dent in our nation’s dependence on foreign oil.”

Republicans from corn-growing states oppose Coburn’s amendment, which he forced a vote on by offering it to pending small-business legislation, a move that caught Democratic and GOP leaders off guard. 

Republicans Sens. John ThuneJohn Randolph ThuneDemocrats press for action on election security Prospects for Trump gun deal grow dimmer Trump, lawmakers consider app that would conduct background checks: report MORE of South Dakota, Mike JohannsMichael (Mike) Owen JohannsMeet the Democratic sleeper candidate gunning for Senate in Nebraska Farmers, tax incentives can ease the pain of a smaller farm bill Lobbying World MORE of Nebraska and Chuck GrassleyCharles (Chuck) Ernest GrassleyWe've lost sight of the real scandal Grassley: Kavanaugh classmate didn't contact Senate panel State Dept sent explosive-detection dogs to Jordan despite evidence of mistreatment: report MORE of Iowa spoke out against Coburn’s proposal on Monday. Thune is a member of Senate leadership.

Meanwhile, Sen. John CornynJohn CornynDemocrats press for action on election security On The Money: NY prosecutors subpoena eight years of Trump tax returns | Senators struggle to get spending bills off ground as shutdown looms | Progressive tax-the-rich push gains momentum | Trump faces dwindling leverage with China Senators struggle to get spending bills off ground as shutdown looms MORE (Texas), another member of Senate GOP leadership, is a co-sponsor of Coburn’s measure. 

Other co-sponsors include Sens. Ben CardinBenjamin (Ben) Louis CardinCongress passes bill to begin scenic byways renaissance GOP lawmaker: 'Dangerous' abuse of Interpol by Russia, China, Venezuela Senators pressure Trump to help end humanitarian crisis in Kashmir MORE (D-Md.), Bob CorkerRobert (Bob) Phillips CorkerTrump announces, endorses ambassador to Japan's Tennessee Senate bid Meet the key Senate player in GOP fight over Saudi Arabia Trump says he's 'very happy' some GOP senators have 'gone on to greener pastures' MORE (R-Tenn.), Mike LeeMichael (Mike) Shumway LeeHillicon Valley: Election security looms over funding talks | Antitrust enforcers in turf war | Facebook details new oversight board | Apple fights EU tax bill Antitrust enforcers in turf war over Big Tech Exclusive: Kushner tells GOP it needs to unify behind immigration plan MORE (R-Utah), Jack ReedJohn (Jack) Francis ReedHouse rejects GOP motion on replacing Pentagon funding used on border wall Is the Senate ready to protect American interests in space? Trump moving forward to divert .6B from military projects for border wall MORE (D-R.I.), Pat Toomey (R-Pa.) and Sheldon WhitehouseSheldon WhitehouseKavanaugh impeachment push hits Capitol buzz saw Senate GOP pledges to oppose any efforts to 'pack' Supreme Court Senate Democrats push Trump to permanently shutter migrant detention facility MORE (D-R.I.). 

One GOP aide who supports Coburn’s amendment said as of Monday morning proponents were very close to collecting the 60 yes votes they need to overcome a filibuster. 

But a Senate GOP aide on the other side said Coburn is rapidly losing Republican votes to an alternative amendment sponsored by Thune that would eliminate the tax break for the rest of this year but provide $1.5 billion in support to ethanol infrastructure, such as a tax incentive for blender pumps. This aide said Coburn would struggle to gain 50 votes. 

Coburn’s amendment, however, may be sunk by the opposition of the Senate Democratic leadership, which is whipping its members against it.

A senior Democratic aide said Coburn took advantage of Democrats’ good faith by hijacking Senate procedures to force a vote on his measure. 

John Hart, Coburn’s spokesman, said the tax break benefits major oil companies that sell gasoline blended with ethanol, and accused Democratic leaders of hypocrisy.

“If they want to protect a $6 billion break for Big Oil, they’re welcome to do that,” he said. 

Democratic leaders also oppose it on policy grounds, arguing that the tax break is due to expire by the end of the year and the Finance Committee is reviewing whether to extend it. 

A GOP leadership aide ripped that line of thinking and suggested the real reason is to protect vulnerable Democratic incumbents from ethanol-producing states. 

It would be politically easier for Sens. Claire McCaskillClaire Conner McCaskillEx-CIA chief worries campaigns falling short on cybersecurity Ocasio-Cortez blasts NYT editor for suggesting Tlaib, Omar aren't representative of Midwest Trump nominees meet fiercest opposition from Warren, Sanders, Gillibrand MORE (D-Mo.) and Ben Nelson (D-Neb.) to vote to protect corn growers or ethanol producers in their states if they vote with Democratic leaders on procedural grounds to kill Coburn’s amendment.  

Special interests on both sides are waging a heavy lobbying campaign. 

The Club for Growth, which advocates for a smaller federal government, announced it would score the Coburn amendment as a key vote. 

“The ethanol subsidy is an abomination, a bad deal for taxpayers, and destructive to economic growth,” said Club for Growth President Chris Chocola. 

A coalition of pro-ethanol groups, including the National Corn Growers Association, the National Farmers Union and the Renewable Fuels Association, sent a letter to McConnell and Senate Majority Leader Harry ReidHarry Mason ReidHarry Reid warns Trump 'can be reelected' Homeland Security Republican accuses Navy of withholding UFO info Poll: 47 percent back limits on Senate filibuster MORE (D-Nev.) on Monday calling for the defeat of Coburn’s proposal.

Ben Geman and Josiah Ryan contributed to this report.