The ethanol credit is widely condemned by Republicans as bad economic policy, and Coburn derides it as spending through the tax code. But a vote to kill it would represent a significant break with more than two decades of GOP tax orthodoxy, which prohibits increasing revenue by any means other than economic growth.
Coburn has argued that Republicans must abandon that orthodoxy to forge a compromise with Democrats on a viable plan to rein in the spiraling national debt.
“I’m not for tax increases, but I don’t think this is a tax increase. This is stupidity at its height,” Coburn said in an interview Friday. “If you vote to give the richest oil companies in this country $3 billion between now and the end of December, then you don’t get it. You are absolutely confused about what the problems are in this country.”
The free-market Club for Growth quickly endorsed the measure, which Coburn is offering as an amendment to unrelated legislation that is not expected to pass. Nonetheless, Club for Growth views the vote as an important step for building political momentum to rid the tax code of all forms of market-distorting corporate tax breaks, said Barney Keller, a spokesman for the group.
“Bad economic policy like this should be eliminated regardless of other changes in the tax code,” Keller said.
Grover G. Norquist, author of the anti-tax pledge and founder of Americans for Tax Reform, said his group is working to defuse the fight by adding a provision to cut taxes in an amount equal to the revenue that would be generated by killing the ethanol subsidy — about $6 billion a year. That way, Norquist said, Republicans who want to vote against ethanol would not be forced to join Coburn’s campaign for higher revenue.
“They’re trying to get people acclimated to raising taxes when the bill is called something else,” Norquist said of Coburn. “We’ll say, ‘It’s the tax increase bill.’ They’ll say, ‘Oh, no, it’s the ethanol bill.’ The next one will be called the deficit-reduction bill. And it won’t work because people are paying attention.”
However, an aide to Coburn said procedural rules bar further changes to Coburn’s measure. That means Tuesday’s vote is likely to force Republicans to make a straightforward statement about their willingness to raise revenues by eliminating tax breaks.
So far, Republican leaders have rejected that idea, which looms as a major point of contention in bipartisan debt-reduction talks between congressional leaders and the White House. But Coburn said he has enough Republican support to get the 60 votes needed to avoid a filibuster and make a strong statement against the ethanol credit.
On Friday, Coburn won the support of tea-party favorite Sen. Jim DeMint (R-S.C.), who issued a statement saying that he will vote for Coburn’s ethanol bill.
Ethanol subsidies have become a flash point in political debate in recent months, with a broad coalition of environmentalists, livestock producers and consumer groups opposing government subsidies for the industry. Up to 40 percent of the nation’s corn crop is diverted to make an alternative fuel that is blended with gasoline. The tax credit does not go to farmers but to fuel blenders, including major oil companies.
In addition to Coburn, Sen. James M. Inhofe (R-Okla.) has been pushing to repeal the tax credit. GOP presidential candidate Tim Pawlenty and likely candidate Jon Huntsman Jr. have expressed public opposition to ethanol subsidies despite their popularity in Iowa, home to the nation’s earliest presidential caucuses.
Americans for Tax Reform also opposes the ethanol credit, calling it “one of literally hundreds of tax code provisions which are bad tax policy.”
Norquist, who has been feuding with Coburn for months over ethanol, said he does not expect many Senate Republicans to vote with him Tuesday. But if they do, Norquist said, House Republicans stand ready to block his path.
“He’s clearly decided to make the case for higher taxes,” Norquist said. “The good news is the House isn’t going to be with him.”