Senate votes to end ethanol tax breaks: What it means

A Senate vote to eliminate $6 billion in tax breaks for ethanol producers is a strong sign that ethanol is losing allies and Congress is increasingly open to getting rid of tax breaks.

Rich Pedroncelli/AP/File
Sen. Dianne Feinstein (D) of California, seen here in Sacramento, Calif., on April 30, was a sponsor of the amendment to cut tax breaks for ethanol producers, which passed the Senate Thursday.

The Senate on Thursday voted, 73 to 27, to end billions of dollars of annual tax subsidies for ethanol producers, signaling a new willingness in Congress to trim the deficit by eliminating some federal tax breaks.

The vote Thursday offered closure to a related vote Tuesday, when the same measure failed, 40 to 59. All but six Democrats had voted against that measure because its sponsor, Sen. Tom Coburn (R) of Oklahoma, bypassed Democratic leadership to bring it to the floor.

But the failed vote Tuesday showed that 34 Republicans were willing to eliminate the $6 billion tax break – a potential breakthrough in the effort to find common ground on deficit-cutting between Republicans and Democrats. On Thursday, with the previous procedural snag ironed out, 40 Democrats joined 33 Republicans.

The importance of the vote is likely to be more symbolic that actual. The bill to which the amendment is attached is unlikely to pass. Moreover, the Obama administration has said it would veto any attempt to cut subsidies for ethanol producers entirely.

But the strong vote count for repealing the subsidy makes it clear that "the status quo for ethanol is no longer an option," wrote Kevin Book, a managing partner with ClearView Energy Partners, an energy market research firm, in an e-mailed analysis.

The amendment would eliminate a tax subsidy of 45 cents for every gallon of ethanol blended into gasoline, as well as tariff protection of 54 cents a gallon added to imports. Ethanol critics argue that the subsidies are a “$6 billion annual giveaway," since federal mandates are already significantly booting the industry. The federal Renewable Fuels Standard (RFS) requires ethanol to be blended into gasoline.

Many environmentalists say corn-based ethanol does little to curb greenhouse-gas emissions and eliminating subsidies to produce it should boost advanced biofuels like cellulosic ethanol, which compete for investment dollars with conventional ethanol.

“Senators scored a win for the public and for the environment,” said Kate McMahon, biofuels campaign coordinator at Friends of the Earth, in a statement. “We thank the senators for reaching across the aisle to send a decisive message that the ethanol industry’s days of living high off the taxpayers’ hog have come to an end."

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