WASHINGTON — Sen. Tom Coburn’s bid to eliminate a federal tax break for ethanol is pitting powerful Washington forces against each other on an issue that spans numerous special interests, including energy, the environment, agriculture and tax policy.
Coburn, who may push for a vote on his proposal this week, has focused primarily on the fiscal logic of paying ethanol blenders roughly $6 billion a year to do something that, he says, they’d be doing without the incentives. But he also has criticized ethanol policy more broadly, saying the corn-based alcohol lowers fuel efficiency and doesn’t help the environment and that the increased use of corn for ethanol production has helped drive food and livestock feed prices higher. Corn growers and the ethanol industry say the criticisms about ethanol are myths and have called Coburn’s amendment “job-killing.” They challenged him to hold a similar debate about tax breaks for the oil and gas industry. Coburn, R-Muskogee, has some powerful allies, including big food companies, meat producers, environmental groups and some watchdog organizations such as Taxpayers for Common Sense. But, he is fighting, in addition to the ethanol industry, Americans for Tax Reform, which sponsors the Taxpayer Protection Pledge to get lawmakers to commit to opposing tax increases. Ryan Ellis, who directs tax policy for the organization, said the blender’s tax credit for ethanol is “very bad tax policy and very bad energy policy.” Still, he said, eliminating the tax credit would result in a net increase in taxes and that the group is stressing that point to senators who signed the taxpayer pledge. Ellis said the amount involved could easily be offset with tax cuts elsewhere. Coburn offered his amendment to a small business bill pending before the Senate, but hasn’t been able to get a vote scheduled. Sen. Charles Grassley, a Republican from the corn-growing state of Iowa, has been working to thwart Coburn’s efforts and told reporters last week, “I don’t want anybody on record on the ethanol issue, if we can avoid it, until we get down to the energy debate.” Coburn spokesman John Hart said the Oklahoma senator “is going to use all procedural means available to him to force a vote on it at the earliest opportunity.”
Federal incentivesThe blender’s tax credit, worth 45 cents per gallon to companies like Sunoco, ExxonMobil and others who blend ethanol with gasoline, was just renewed in December and is set to expire at the end of this year. It is one of several federal incentives — including a tariff on imported ethanol — for domestic ethanol production. Coburn said the incentive that makes the blender’s tax credit unnecessary is the Renewable Fuel Standard, which was increased by Congress in 2007 to require 36 billion gallons of renewable fuel be blended into transportation fuel by 2022. The amount of corn ethanol is capped at 15 billion gallons.