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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 Emiel FeinsteinProgressive support builds for expanding lower courts Menendez reintroduces corporate diversity bill What exactly are uber-woke educators teaching our kids? MORE's (D-Calif.) measure – which mirrors a bill she offered with Sen. Tom CoburnThomas (Tom) Allen CoburnDemocrats step up hardball tactics in Supreme Court fight COVID response shows a way forward on private gun sale checks Inspector general independence must be a bipartisan priority in 2020 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 ReidTrumpists' assaults on Republicans who refuse to drink the Kool-Aid will help Democrats The Jan. 6 case for ending the Senate filibuster Manchin flexes muscle in 50-50 Senate 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 ThuneAfter vote against coronavirus relief package, Golden calls for more bipartisanship in Congress Graham: Trump will 'be helpful' to all Senate GOP incumbents Cruz hires Trump campaign press aide as communications director MORE (R-S.D.) and Amy KlobucharAmy KlobucharOpen-ended antitrust is an innovation killer FBI, DHS and Pentagon officials to testify on Capitol riot Five big takeaways on the Capitol security hearings 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 BluntPartisan headwinds threaten Capitol riot commission Passage of the John Lewis Voting Rights Advancement Act is the first step to heal our democracy Microsoft, FireEye push for breach reporting rules after SolarWinds hack MORE (Mo.), Saxby ChamblissClarence (Saxby) Saxby ChamblissLive coverage: Georgia Senate runoffs Trump, Biden face new head-to-head contest in Georgia Ex-GOP senator from Georgia suffers mild stroke: report MORE (Ga.), Daniel Coats (Ind.), Thad CochranWilliam (Thad) Thad CochranBottom line Alabama zeroes in on Richard Shelby's future Hyde-Smith fends off challenge from Espy in Mississippi MORE (Miss.), Chuck GrassleyChuck GrassleyGrassley to vote against Tanden nomination Grassley says he'll decide this fall whether to run in 2022 Yellen deputy Adeyemo on track for quick confirmation MORE (Iowa), John HoevenJohn Henry HoevenBiden reignites immigration fight in Congress McConnell about to school Trump on political power for the last time Senate GOP opposition grows to objecting to Electoral College results MORE (N.D.), 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 (Neb.), Mark KirkMark Steven KirkSenate majority battle snags Biden Cabinet hopefuls The Hill's Morning Report - Sponsored by Facebook - Senate makes SCOTUS nominee Barrett a proxy for divisive 2020 Senate Republicans scramble to put Trump at arm's length MORE (Ill.), Richard Lugar (Ind.), Jerry MoranGerald (Jerry) MoranGraham: Trump will 'be helpful' to all Senate GOP incumbents The Hill's 12:30 Report - Presented by Facebook - Biden vs. Trump, part II Passage of the John Lewis Voting Rights Advancement Act is the first step to heal our democracy MORE (Kan.), Rob PortmanRobert (Rob) Jones PortmanSunday shows preview: 2024 hopefuls gather at CPAC; House passes coronavirus relief; vaccine effort continues Grassley to vote against Tanden nomination Murkowski undecided on Tanden as nomination in limbo MORE (Ohio), Pat RobertsCharles (Pat) Patrick RobertsPat Roberts joins lobbying firm weeks after Senate retirement Senate swears-in six new lawmakers as 117th Congress convenes Window quickly closing for big coronavirus deal MORE (Kan.) , John Thune (S.D.), and Roger WickerRoger Frederick WickerPassage of the John Lewis Voting Rights Advancement Act is the first step to heal our democracy Overnight Health Care: US surpasses half a million COVID deaths | House panel advances Biden's .9T COVID-19 aid bill | Johnson & Johnson ready to provide doses for 20M Americans by end of March 11 GOP senators slam Biden pick for health secretary: 'No meaningful experience' MORE (Miss.).

The ethanol industry fared better on a second vote. Lawmakers voted 41-59 against Sen. John McCainJohn Sidney McCainCindy McCain planning 'intimate memoir' of life with John McCain Trump-McConnell rift divides GOP donors Arkansas state senator says he's leaving Republican Party 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.