Senate vote to repeal ethanol tax credit fails, but some in GOP break ranks

A majority of Senate Republicans appeared to break Tuesday with two decades of GOP orthodoxy against higher taxes, voting to advance a plan to abruptly cancel billions of dollars in annual tax credits for ethanol blenders.

The measure, offered by Sen. Tom Coburn (R-Okla.), fell short of the 60 votes needed to overcome a filibuster threat. But it had the support of 34 of 47 Republicans, most of whom have signed an anti-tax pledge that specifically prohibits raising taxes by any means but economic growth.

Coburn has argued forcefully that Republicans must abandon that pledge if they are serious about tackling the spiraling national debt. Though the Senate turned back his measure, he said the vote nonetheless marks the beginning of the end of GOP tolerance for wasteful giveaways through the tax code.

“You’ve got 34 Republicans that say they’re willing to end this, regardless of what Grover says,” Coburn said, referring to pledge creator Grover G. Norquist, the founder of Americans for Tax Reform. “That’s 34 Republicans that say this is more important than a signed pledge to ATR.”

The vote was hardly a slam dunk for Coburn’s crusade against the dozens of tax credits and deductions that he derides as government spending by another name. Several senators who voted against the ethanol credit, which is widely condemned by Republicans as bad economic policy, said they would not necessarily vote to end other types of tax breaks. And Norquist, who has been feuding for months with Coburn, pressed an elaborate campaign to blunt the vote’s ideological impact.

Still, many GOP senators were emphatic in their support for the Coburn measure, suggesting that a crack may be opening in the Republican front against new revenue — a development that could help ease a path to a debt-reduction compromise with Democrats, who are insisting on additional revenue as part of any deal.

“Everybody’s entitled to their own opinion,” said Sen. John McCain (R-Ariz.), when asked whether wiping out the ethanol credit is tantamount to raising taxes. “It’s my opinion that it’s a disgraceful subsidy that is unwarranted and a waste of taxpayer dollars.”

Rep. Chris Van Hollen (D-Md.), a participant in bipartisan talks led by Vice President Biden aimed at forging a debt-reduction agreement, said Coburn’s “willingness to cut special-interest tax breaks for the purpose of deficit reduction is encouraging.”

“A realistic conversation about deficit reduction must include both cuts and revenues, and Senator Coburn’s amendment to eliminate $6 billion in tax earmarks for ethanol is an important part of this discussion,” Van Hollen said.

The Biden talks resumed with fresh urgency Tuesday. Biden said the group of top administration officials and six lawmakers has set a goal of presenting a plan to President Obama, House Speaker John A. Boehner (R-Ohio) and Senate Majority Leader Harry M. Reid (D-Nev.) by July 1.

“We are making real progress,” Biden told reporters afterward. “It ain’t over till it’s over, but I’m convinced that we can come up with an agreement that gets the debt limit passed and makes some real serious down payment on a commitment to [save] 4 trillion bucks over the next 10 or 12 years.”

The parameters of the deal are very much in flux. But all sides signaled Tuesday that they are aiming for a package that would reduce future borrowing by at least $2 trillion. That would be paired with a debt-limit increase of roughly the same size — enough to pay the nation’s bills through the end of next year.

Treasury Secretary Timothy F. Geithner has said the government risks defaulting on its obligations after Aug. 2 unless Congress acts to lift the $14.3 trillion debt limit. Until Tuesday, it was unclear whether policymakers would settle for a shorter-term extension that would force Congress to take another vote on the hugely unpopular issue in the months leading up to the 2012 election.

“You’d like to do it all at once,” said Sen. Jon Kyl (Ariz.), the No. 2 GOP leader, who represents Senate Republicans in the talks. “You’d hate to have to come back and do it in pieces.”

If a plan emerges by July 1, Biden said, Obama and congressional leaders will have ample time to hammer out final concerns and set a legislative path for what is likely to be a complicated and contentious measure, packed with unprecedented changes to long-protected programs such as farm subsidies and pensions for federal workers.

After initially focusing on areas of common ground, the two sides have now moved to tougher issues, such as how to enforce a multi-year agreement to cut spending. Republicans want spending caps that would trigger automatic cuts if they are breached; Democrats want deficit caps that could also trigger higher taxes. The group is also looking at steep reductions in agency spending for 2012 and 2013.

While Democrats have insisted on new revenue as part of the deal, Republicans have demanded cuts to the entitlement programs, especially Medicare, that are the biggest drivers of future spending. On Tuesday, Senate Democratic leaders reiterated their opposition to any reduction in Medicare benefits, though they left the door open to other changes, such as forcing drug companies to charge the program lower rates.

It was unclear Tuesday whether the ethanol vote has any direct implications for the Biden talks. Though he was among the 34 Republicans who voted to advance the measure, Senate Minority Leader Mitch McConnell (R-Ky.) told reporters that ending tax breaks is “the kind of thing you would typically do in a broad tax reform bill,” not in debt-reduction talks.

For his part, Norquist claimed victory, saying he had prevented Coburn from tricking his colleagues into voting for a tax increase. At a Capitol Hill meeting Tuesday morning with more than 100 GOP staffers, Norquist said he authorized senators to advance the Coburn measure so long as they also supported a bill by Sen. Jim DeMint (R-S.C.) to cut the estate tax.

This strategy, Norquist said, “robbed” Coburn of the opportunity to persuade his Senate colleagues to vote for higher taxes.

“We won, he lost; he can try again, but he’s not going to get his tax increase,” Norquist said. “Because the House won’t let him have his tax increase, even if he thinks he can get it through the Senate.”

Staff writer Felicia Sonmez contributed to this report.

Lori Montgomery covers U.S. economic policy and the federal budget, focusing on efforts to tame the national debt.
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