WASHINGTON – Tomorrow, the Senate will debate an amendment put forward by Sen. Tom Coburn (R-OK) that would effectively end the current ethanol subsidy system which currently doles out nearly $6 billion a year to ethanol producers.
Corn state senators aren’t happy about this vote. DFL Sen. Amy Klobuchar and Sen. John Thune (R-SD) have introduced a bill that they hope will bleed votes away from Coburn’s amendment.
Their bill would also end the 45 cent per gallon tax credit for ethanol but would direct some of the funds that would have paid the subsidy towards upgrading gas station fuel pumps for ethanol and financing research on advanced cellulosic biofuels that don’t use corn and have lower emissions.
The bill would also direct a billion dollars in savings towards deficit reduction.
“Our bipartisan legislation would provide businesses a clear glide-path to move forward and keep the biofuels industry competitive while reducing our debt by a billion dollars this year,” said Klobuchar in a statement.
The politics behind the amendment are a bit convoluted.
While Coburn, who hails from an oil-producing state, has long detested ethanol subsidies, what’s driving the debate behind this amendment is a dispute within the Republican party over what constitutes a tax increase.
The party’s anti-tax wing, led by Grover Norquist of Americans for Tax Reform, says that any measure that closes a tax loophole and increases the government’s revenues constitutes a tax hike. While Coburn does not support new taxes or an increase in tax rates, he wants to end many tax breaks and using the higher tax revenue to close the budget deficit.
So while it’s ethanol that the senators will be debating tomorrow, the subtext of the debate is whether Republicans will be willing to end long-popular tax breaks that benefit favored industries and use the extra money that comes in on deficit reduction.
Of course, even if the Senate were to adopt Coburn’s amendment, it would still have to go through the House of Representatives and onto the White House and several Congressional sources told me they’re skeptical that the House GOP would sign off on Coburn’s measure.