Ethanol Subsidies Survive Senate Vote, Splinter GOP

Jun 14, 2011

Costly subsidies for homegrown fuel won a vote of confidence Tuesday on Capitol Hill. In a key test vote, the Senate blocked a measure that would have immediately ended both federal subsidies and protective tariffs for corn-based ethanol fuel.

The outcome showed the continued clout of farm states. But it also showed that most Senate Republicans are willing to get rid of at least one tax break.

A 'Very Controversial Subject'

Where senators stand on ethanol tax subsidies often has more to do with which state they're from than which party they belong to.

"This is a very controversial subject," says Senate Minority Leader Mitch McConnell (R-KY). "We have members in our conference on both sides of this issue."

Still, Oklahoma Republican Tom Coburn had been trying for months to force colleagues to take a stand on the more than $5 billion in tax breaks for the ethanol industry this year.

Coburn angered some colleagues when he resorted to a parliamentary maneuver late last week to oblige the Senate to vote on taking up his measure. It would cut off the $3 billion worth of tax credits still to be paid this year to those who by law are already required to blend ethanol with gasoline.

According to Coburn, virtually all that money goes to big oil companies, which he says don't want it.

"Here's something that is $3 billion that the people we're paying to say they don't want the $3 billion, and we're not going to take them up on it?" he says. "What part of stupid are we?"

California Democrat Dianne Feinstein says it's Congress that's helped push up food prices by encouraging farmers to grow corn for fuel rather than food.

"Diverting 39 percent of our crop towards ethanol is artificially driving up corn prices," she says, "which in turn is straining people and industries that depend on affordable corn."

But Iowa Republican Charles Grassley argues it makes no sense for Congress to end the tax breaks for corn-based ethanol, which is now 10 percent of the nation's fuel supply.

"We'll get less domestically produced energy, it will cost U.S. jobs, it will increase our dependence upon foreign oil, it will increase prices at the pump for the American consumer," he says.

Still, other farm state senators acknowledge that the ethanol subsidies, while still a big issue for presidential hopefuls in Iowa, are getting harder to justify.

"We're going to see a phasing out of the support for biofuels in terms of federal policy," says Minnesota Democrat Amy Klobuchar. "But the time to do it is not in the middle of the year, after seven years of federal support, with five days' notice."

A Tax Debate

For others, this wasn't a vote about ethanol at all. Anti-tax crusader Grover Norquist, who's gotten most congressional Republicans to sign vows not to raise any taxes, questions Coburn's motives in trying to end the ethanol tax breaks.

"What he's trying to do is trick some Republicans into voting for a tax increase so he can say to them, 'Now join me in my support for working with Obama to raise taxes,' " Norquist says.

Republican Pat Toomey disagrees. Like the anti-tax Club for Growth that Toomey previously headed, the Pennsylvania freshman says he doesn't care if ending the ethanol subsidy does mean a higher tax bill for some people.

"I think my credentials as a pro-growth, limited government, low-tax guy are pretty strong, and they're gonna stay that way," he says. "I see this as just egregiously flawed policy that we should fix."

Thirty-four other Senate Republicans apparently felt the same way, too; they voted to take up Coburn's tax-break-ending measure, as did half a dozen Democrats. That left them 20 votes short of the 60 the proposal would have needed to advance.

Still, the tally showed that when it comes to at least one tax break, even Republicans who generally oppose raising taxes are willing to make an exception. Which might also mean some GOP lawmakers could make another exception in a deal to raise the debt ceiling this summer.

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