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Posted at 06:26 PM ET, 06/15/2011

Top Senate Republican suggests eliminating energy tax breaks to reduce debt


Sen. Lamar Alexander (R-Tenn.), Sen. John Barrasso (R-Wyo.) and Senate Minority Leader Mitch McConnell (R-Ky.) at a Capitol Hill news conference this month. (By Alex Brandon/Associated Press)
One day after a majority of Republicans voted to do away with ethanol subsidies, the Senate’s No. 3 Republican said Wednesday that he is working on legislation that could eliminate a variety of energy tax subsidies and dedicate the proceeds to debt reduction.

The move by Sen. Lamar Alexander (R-Tenn.) is the latest sign of a break within the ranks of the GOP, which has for at least two decades strongly opposed raising taxes by any means other than economic growth.

“Permanent subsidies for mature technologies, to me, are inappropriate, so we’re looking over those carefully, and I expect that before long, I’ll have legislation that will look at all energy tax breaks,” Alexander told reporters at a pen-and-pad briefing Wednesday afternoon.

Tuesday’s ethanol vote, while ultimately unsuccessful, garnered the support of 34 of 47 Senate Republicans.

Alexander listed a number of possible areas toward which the savings could be directed, including energy research, deficit reduction and reducing marginal tax rates.

Alexander said that he believes it’s important to “jump start” new technologies and listed examples of several types of short-term subsidies that he would support, including loan guarantees for nuclear power and credits for research and development of clean energy, solar energy and electric cars.

But he argued that after a period of several years, those subsidies outlive their usefulness.

“The wind subsidy came in 1992 for a few years, and that’s 20 years ago,” Alexander said. “It’s a mature technology. It makes no sense for the taxpayer to be on the hook for $26 billion over the next 10 years to subsidize a puny amount of unreliable electricity at a time when we’re borrowing 40 cents of every dollar.”

Alexander’s remarks came as bipartisan negotiators trying to craft a plan to rein in the soaring national debt met for nearly three hours on Wednesday. The talks, led by Vice President Biden, are aimed at reaching a preliminary agreement before the July 4 break.

After focusing Tuesday on agency spending, the group focused Wednesday on how to enforce a multi-year deal. Republicans want a global cap on all government spending — including entitlement programs, such as Social Security and Medicare — that would trigger automatic cuts if the cap were breached. The White House wants a cap on the size of annual budget deficits that would trigger tax hikes as well as spending cuts.

House Democrats, meanwhile, are pressing a third option known as “SaveGo.” Developed by the Bipartisan Policy Center, that proposal calls for lawmakers to set specific annual targets for spending and revenues that would ultimately stabilize the national debt at 60 percent of GDP. Failure to meet those goals would trigger automatic cuts or tax hikes triggered in any of three areas: agency spending; government health spending; and other programs and taxes.

Also on Wednesday, the group discussed a White House proposal to expand to employers the one-year payroll tax holiday that currently benefits workers. According to people familiar with the talks, Democrats are hoping that Republicans might accept the expansion as a tax cut that could be used to offset other sorts of revenue increases.

Rep. Chris Van Hollen (D-Md.), who represents House Democrats in the talks, said Democrats have given Republicans a “menu of options” of corporate tax breaks that could be eliminated to reduce the debt. “The purpose is to get a handle on the deficit and reduce the deficit, and there are two sides to that equation: spending cuts as well as revenue,” Van Hollen told reporters. Among the options: eliminating oil and gas subsidies and special tax breaks for owners of corporate jets.

Republican leaders, however, are not enthusiastic about expanding the payroll tax holiday. And a Senate Republican aide familiar with the Biden talks called the idea that Republicans might be willing to pair it with tax increases “pure, unadulterated nonsense.”

Democrats have also talked extensively about targeting oil and gas subsidies. Asked about those subsidies Wednesday, Alexander said that he might examine some of them, although on the whole he believes that the industry’s tax breaks probably would not be included in his review.

“Oil companies and natural gas companies get the same kinds of business deductions that all businesses get,” he said. “I don’t consider those special breaks for oil and gas. They get the same tax deductions that Starbucks gets, or Microsoft. But they might get some others that might be included in that review.”

The Biden talks are set to resume Thursday, when the group will revisit areas already discussed — such as farm subsidies and federal worker pensions — in hopes of reaching a tentative agreement.

By and  |  06:26 PM ET, 06/15/2011

 
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