Corn Ethanol Tax Breaks Attacked by Senate (Including Republicans)

There was a rare moment of harmony between the two parties in the Senate on Thursday after Republicans yielded their orthodoxy on taxes and voted in favour of eliminating credits and tariffs on corn ethanol – used for producing ethanol fuel used in gasoline.

The amendment, voted 73-27 in favour, was spurred by record-high corn prices – rises that have had a steep financial impact on other aspects of the agricultural economy – and the need to tackle the US’s $1.5 trillion deficit. Oil refiners would see their 43-cent-per-gallon tax credit wiped out, as well as a 54-cent-per-gallon tariff that blocks sugar ethanol, a more energy-efficient alternative, mainly from Brazil. Critics had previously slammed the subsidies as a “$6 billion annual giveaway,” given the federal mandates that already boost the industry.

Ending such subsidies would see the end of unnecessary excesses in corn ethanol, thus driving down the price of corn and related food-based products. It also evens the playing field for other biofuels that have previously had to compete for investment funds with conventional ethanol.

Democratic California senator Dianne Feinstein and Republican Oklahoma senator Tom Coburn led the fight for amendment, which saw overriding support from the majority of both parties. Much against the GOP conventionalism, 33 Republican senators voted in favour of eliminating the break. The 27 votes against the proposal all hailed from the Midwest Corn Belt.

Democrats made no short time of jumping onto what they described as a major GOP concession on taxes. Democratic New York Senator defined the vote as a “Watershed moment” in the deficit reduction talks which rocked the US government earlier this year.

The vote saw a U-turn from Democrat senators, who urged its members to vote against the proposal two days previously, claiming that Coburn has urged the vote on himself, working well outside his powers in a Democratic controlled Senate. This time, in a joint-effort with the Democrats asserting their control, there were no such unsporting procedures.

The Obama administration has said that it supports reducing the ethanol tax credit, but doesn’t support fully eliminating it. This could see the amendment stall for now, as it is attached to a stalled economic development bill, but such tax breaks and credits are unlikely to be extended when they come up for renewal at the end of this year.

Picture courtesy of Beef Magazine

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