Is the end of a tax credit a tax increase? That was the question Republican senators were forced to ponder as they mulled their vote on the amendment Tuesday that would have ended ethanol support. According to reports from wire services and The Hill, a Washington, D.C., news service, Republicans were under pressure from American for Tax Reform that lobbied against the Coburn amendment on the grounds that elimination of any tax break - even corporate subsidies - had to be offset by other tax cuts.
The group viewed the ending of the tax credit for ethanol - by itself - as a tax increase, which ATR was completely against. The group was in favor of merging that idea with a move to end estate taxes, but on its own ATR was against the Coburn move.
Some say the ATR approach creates a climate that would stall any moves to end tax credits - no matter who the beneficiary may be. Whether that becomes the general rule in Washington remains to be seen. The Coburn amendment, which needed 60 votes to pass the Senate failed 59-against to 40 in favor.
Meanwhile, trade groups applauded the Senate's move to defeat the measure. Tom Buis, CEO, Growth Energy, notes: “The fight is not over until we achieve real reform for the ethanol industry, but this vote sends a signal that there is a right way and a wrong way to go about it. For more than a year, Growth Energy has advocated for our Fueling Freedom plan, which would phase out the VEETC in a fiscally responsible way, while redirecting the funds toward ethanol infrastructure build out. Opening the fuels market to ethanol, through Flex Fuel pumps and Flex Fuel vehicles, would give consumers a choice at the pump and allow us to ultimately eliminate all government assistance."
Jim Reed, president, Illinois Corn Growers Association, says defeat of the Coburn amendment "indicates that the Senate understands the vital role ethanol plays in the overall health of the U.S. economy. Domestic ethanol production provides jobs in rural areas and provides savings at the pump every time cash-strapped American fuel up."
In a press statement, ICGA adds that " change is necessary as our government endeavors to make prudent budget decisions. That's why ICGA has for months been in support of an immediate move to a variable ethanol tax credit and incentives to promote infrastructure development to deliver homegrown, renewable fuels to retail locations around the country."
Coburn responds to loss
After losing the vote on the amendment, Sen. Tom Coburn, R-Okla., issued a statement, noting that the Senate's refusal to save taxpayers $3 billion by "ending an ethanol subsidy the beneficiaries themselves don't want highlights the incompetence and dysfunction of this body. Many senators who opposed this policy refused to end it because Senate Democratic leaders were upset about being forced to make a tough vote. Instead of protecting taxpayers by reducing our deficit and lowering food prices, many senators chose to protect the desire of Senate leaders to avoid tough issues."
He adds that taxpayers should be encouraged that Republican senators overwhelmingly " rejected the ludicrous argument that eliminating tax earmarks is a tax increase. Tax provisions should be examined on a case by case basis, not receive blanket amnesty."