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 FeinsteinGOP rep to introduce constitutional amendment to limit Supreme Court seats to 9 Senate Dems petition Saudi king to release dissidents, US citizen Court-packing becomes new litmus test on left MORE's (D-Calif.) measure – which mirrors a bill she offered with 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.) – 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 ReidBernie campaign 2.0 - he's in it to win it, this time around Dems wrestle over how to vote on ‘Green New Deal’ Senate confirms Trump court pick despite missing two 'blue slips' 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 ThuneCongress should take action to stop unfair taxation of the digital economy The fear of colorectal cancer as a springboard for change Senators offer bipartisan bill to fix 'retail glitch' in GOP tax law MORE (R-S.D.) and Amy KlobucharAmy Jean KlobucharWarren, Klobuchar call on FTC to curtail use of non-compete clauses Republican strategist predicts his 2020 Dem primary final four Chicago mayor race mirrors national push for more women in office, says columnist 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 BluntRisk-averse Republicans are failing the republic Senate GOP poised to go 'nuclear' on Trump picks The Hill's Morning Report - Dems contemplate big election and court reforms MORE (Mo.), Saxby ChamblissClarence (Saxby) Saxby ChamblissEx-House Intel chair: Intel panel is wrong forum to investigate Trump's finances The Hill's Morning Report - Trump budget reignites border security fight Senate buzz grows for Abrams after speech electrifies Dems MORE (Ga.), Daniel Coats (Ind.), Thad CochranWilliam (Thad) Thad CochranTop 5 races to watch in 2019 Bottom Line Races Dems narrowly lost show party needs to return to Howard Dean’s 50 state strategy MORE (Miss.), Chuck GrassleyCharles (Chuck) Ernest GrassleySeniors win big with Trump rebate rule  Klobuchar: ObamaCare a 'missed opportunity' to address drug costs Just one in five expect savings from Trump tax law: poll MORE (Iowa), John HoevenJohn Henry HoevenDem lawmaker 'confident' bipartisan group will strike deal on border funding Congress in painful start to avoid second shutdown Republicans want Trump to keep out of border talks 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 KirkThe global reality behind 'local' problems Dems vow swift action on gun reform next year This week: Trump heads to Capitol Hill MORE (Ill.), Richard Lugar (Ind.), Jerry MoranGerald (Jerry) MoranThe 25 Republicans who defied Trump on emergency declaration Overnight Defense: Senate rejects border emergency in rebuke to Trump | Acting Pentagon chief grilled on wall funding | Warren confronts chief over war fund budget 12 Republican senators defy Trump on emergency declaration  MORE (Kan.), Rob PortmanRobert (Rob) Jones PortmanTrump faces political risks in fight over GM plant GOP moves to rein in president's emergency powers The 25 Republicans who defied Trump on emergency declaration MORE (Ohio), Pat RobertsCharles (Pat) Patrick RobertsPompeo jokes he'll be secretary of State until Trump 'tweets me out of office' Senators offer bipartisan bill to fix 'retail glitch' in GOP tax law Kansas Senate race splits wide open without Pompeo MORE (Kan.) , John Thune (S.D.), and Roger WickerRoger Frederick WickerJuan Williams: Don't rule out impeaching Trump The 25 Republicans who defied Trump on emergency declaration Overnight Defense: Senate rejects border emergency in rebuke to Trump | Acting Pentagon chief grilled on wall funding | Warren confronts chief over war fund budget MORE (Miss.).

The ethanol industry fared better on a second vote. Lawmakers voted 41-59 against Sen. John McCainJohn Sidney McCainTrump blasts McCain, bemoans not getting 'thank you' for funeral Trump's approval rating stable at 45 percent GOP senator: Trump's criticism of McCain 'deplorable' 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.