Ethanol vote: First step toward extinction for federal tax subsidies?

Maverick Sen. Tom Coburn (R) of Oklahoma lost his first assault on the ethanol tax credit by a lopsided procedural vote, 59 to 40. But Tuesday’s vote is only the beginning of a siege on perceived pork in the tax code by the lawmaker who led the charge to outlaw pork spending.

The vote also opened a rare rift in GOP ranks on the question of what constitutes a tax increase – a breach that could give bipartisan negotiators more scope to resolve a debt crisis set to hit as early as Aug. 2. Of the 40 votes to oppose a $6 billion annual tax subsidy for ethanol blenders, 34 were Republican.

“While I’m disappointed my amendment did not pass, taxpayers should remember that when I offered an amendment to defund the Bridge to Nowhere in Alaska in 2005, we lost that vote 82 to 15,” said Senator Coburn in a statement after the vote.

“Over time, however, the will of the people prevailed, and Congress was forced to scale back this wasteful and corrupting practice,” he added. “Today, the earmark favor factory is mainly closed. Only the tax division remains open.”

There is the sense that the issue of trimming tax breaks could get far more Democratic support than the six votes it garnered Tuesday. Many Democrats voted against the amendment for partisan and procedural reasons – Coburn bypassed Senate majority leader Harry Reid in getting his measure to the floor. For example, Dianne Feinstein (D) of California, an original cosponsor of the Coburn amendment, voted against it Tuesday. She will offer similar amendment later this month.

Before Tuesday’s vote, however, all eyes were on the GOP. Republicans in both the House and Senate had rallied around the principle that tax increases were off the table, period. Most had signed a pledge by Americans for Tax Reform (ATR) that committed lawmakers to opposing increases in tax rates as well as cuts to tax credits, unless offset by other new tax cuts.

The Congressional Research Service estimates that the US spends some $1 trillion annually in such tax breaks, or “tax expenditures.” The ATR’s taxpayer pledge is against cutting such tax expenditures because it does not trust the government to apply the extra revenues to deficit or debt reduction. The ATR's goal is to keep money out of government hands at all costs.

Coburn challenged that orthodoxy. The 45-cent-per-gallon ethanol tax credit is not needed, he said, because federal madates that require refiners to blend ethanol into gasoline already act as a subsidy. Moreover, he argued that using corn ethanol in fuel raises food and fuel prices for consumers.

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