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Fiscal Policy Richard Falknor on 13 Jun 2011 07:29 am

High Noon For Ethanol Tomorrow in the U.S. Senate?

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Blue Ridge Forum has always understood that “ethanol” owns Washington, D. C. as “slots” own Annapolis.

But tomorrow the ethanol cartel may prove not quite so fireproof — at least in the U.S. Senate.

Politico’s Darren Goode reported last Thursday in his “Coburn forces Tuesday ethanol vote” that –

“Sen. Tom Coburn has pulled the trigger and is forcing a long-sought vote on an amendment repealing billions in annual tax incentives for ethanol.

The Senate will vote Tuesday afternoon on Coburn’s motion limiting debate on his amendment that would do away with the 45 cent blender tax credit for ethanol — worth about $6 billion this year — and the 54 cent tariff on imported ethanol.

Coburn didn’t inform either Senate Majority Leader Harry Reid or Minority Leader Mitch McConnell before he made his move,  appearing to catch both completely off guard.”

Last Saturday, The Hill’s Bernie Becker gave us useful detail in his “Vote to end ethanol subsidies revives Coburn-Norquist tax revenue battle” –

“Both Coburn and Norquist have said they opposed a tax credit that gives refiners and gasoline blenders 45 cents for every gallon of ethanol bought and combined with gasoline – a policy the Government Accountability Office says cost about $5.4 billion in 2010. Coburn, whose measure is set to be voted on as an amendment to legislation reauthorizing the Economic Development Administration, calls it the kind of spending in the tax code that unfairly chooses economic winners and losers.

The amendment is strongly backed by the fiscally conservative Club for Growth, and the proposal has received support in the past from groups like the Heritage Foundation.”

Becker also relates what we would call a stricter taxpayer perspective –

“But [Grover] Norquist has expressed concern that the Oklahoma senator’s measure – which does not offset the revenues from the ethanol subsidy – is a stalking horse for a broader push to find new tax revenue, something Coburn is calling for more and more to help close yawning budget gaps.

‘His goal is to try and say: ‘Ha, ha, see in some cases it’s OK to eliminate credits and deductions and not offset it,’ the Americans for Tax Reform president told The Hill on Friday. ‘And then he’ll come back with $2 trillion in tax increases and try to say that’s somehow not a tax increase. It’s wrong on so many levels.’

The scheduled ethanol vote comes as Coburn and Norquist have sniped at each other consistently in the recent weeks and months, in large part over Coburn’s participation in the Gang of Six.” (Underscoring Forum’s.)

GOP senator Jim DeMint of South Carolina declared Friday through a press release –

“Today [last Friday], U.S. Senator Jim DeMint (R-South Carolina) announced his support for the repeal of subsidies, mandates, and tariffs on ethanol. Senator DeMint will vote in support of an amendment offered by U.S. Senator Tom Coburn (R-Oklahoma) to repeal the ethanol subsidy and the tariff on ethanol imports.  Senator Coburn filed a cloture petition on the amendment on Thursday to end debate, which Senator DeMint signed, forcing a vote on Tuesday afternoon. Senator DeMint announced that he also plans to offer an amendment to repeal the renewable fuels standard that requires blenders to use ethanol. (Underscoring Forum’s.)

Americans for Tax Reform (ATR) summed up their position in their “Coburn Amendment half-baked without DeMint Fix: Together they end Washington’s unfair support of ethanol”

“Americans for Tax Reform today reiterated its support for full, tax revenue neutral repeal of all government granted advantages and preferences to the ethanol industry. To this end, ATR is pleased to support Senator Jim DeMint’s amendment which repeals the Renewable Fuel Standard (ethanol mandate) and kills the death tax. This amendment fills in the gaps left by Senator Tom Coburn’s ethanol amendment and overwhelms the Coburn tax increase with a more significant tax reduction. The Coburn amendment repeals the ethanol tax credit and tariff but in a way that raises net taxes and grows government spending. The DeMint amendment abolishes the death tax which is a significantly larger tax cut than the Coburn amendment’s $6 billion tax increase. The DeMint amendment also cuts to the heart of the government’s support for ethanol by repealing the mandate that requires American families to purchase ethanol at the gas pump.”(Underscoring Forum’s.)

ATR’s crucial last (political) word on the matter:

“Taxpayer Protection Pledge signers should feel free to support the Coburn amendment provided they also vote for the DeMint amendment.”

ADD-ON: Readers may want to re-visit Dan Mitchell’s analysis which we posted (scroll down to middle of article) last May 14 - -

Supply-side economist and tax reformer Dan Mitchell wrote last March in his “Norquist Is Right and Coburn Is Wrong: Tax Increases Will Lead to More Spending, Not Lower Deficits”

“I’m a huge fan of Senator Coburn, who was in favor of cutting wasteful spending before it became fashionable. His office, for instance, releases a “Pork Report” every couple of days. But you shouldn’t read it if you have high blood pressure, because it will confirm (and reconfirm, and reconfirm, ad nauseum) your worst fears about tax dollars getting wasted. Nonetheless, I’m on Grover’s side on this tax debate for two reasons. First, we have a spending problem, not a revenue problem or a deficit/debt problem. Red ink is undesirable, to be sure, but it is a symptom of the underlying problem of a government that is too big and spending too much.” . . . “The second reason for a firm no-tax increase position is that higher taxes are a very ineffective way of reducing budget deficits. Indeed, tax increases generally backfire and lead to more red ink. To understand why, it’s important to put away the calculator and instead consider the real world of politics and public policy.”

UPDATE JUNE 17! Timothy Carney asked yesterday “Eliminating an ethanol subsidy: Does that count as hiking taxes or as cutting spending?” (Washington Examiner)“After killing a similar measure yesterday, the Senate voted today to scrap the federal ethanol tax credit. This tax credit is one of many subsidies ethanol receives — the most important one is the federal ethanol mandate. The effort to kill the credit is also at the heart of the ugly intra-conservative fight I wrote about in my column today.”

UPDATE JUNE 14! The Ethanol Cartel triumphs again! Here is this afternoon’s vote denying cloture to senator Tom Coburn’s amendment “to repeal the Volumetric Ethanol Excise Tax Credit,” 40 yeas to 59 nays. (60 yeas were needed for cloture.) 13 Republicans voted for the Dark Side. Perhaps Tea Partyers and grass-roots conservatives should ask all Republican incumbents and candidates whether they are pro-market or just pro-(their favorite)-business. As James Pethokoukis explains: “Pro-market public policies make markets function fairer and more efficiently for everyone. They encourage competition and ‘creative destruction’ and entrepreneurial capitalism. Pro-business policies often shift taxpayer money and other government goodies to favored companies, raise barriers to entry and otherwise defend the status quo.”

Here is ATR’s statement on today’s failure to invoke cloture.

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