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Senate votes to eliminate ethanol tax credit

A proposal to end a tax credit for companies that blend ethanol with gasoline and a tariff on imported ethanol receives bipartisan support in the Senate.

June 16, 2011|By Lisa Mascaro, Washington Bureau
(Alex Brandon/AP )

Reporting from Washington — The Senate voted Thursday to do away with the ethanol tax credit, an indication of waning support for the nearly $6 billion annual subsidy amid spiraling federal debt.

But the tax credit is likely to survive, at least for now: Its elimination is attached to a stalled economic development bill.

The 73-27 vote to advance the legislation drew support across party lines. Senators from farm states found little backing for continuing a tax break that government auditors have called unnecessary.

"This subsidy is wasteful and duplicative," said Sen. Dianne Feinstein (D-Calif.), who wrote the measure with Sen. Tom Coburn (R-Okla.).

The 45-cent-per-gallon tax credit goes to companies that blend ethanol with gasoline. But the Government Accountability Office said this year that the incentive was no longer necessary because a 2005 energy act required ethanol to be increasingly mixed with gas. The proposal also would end a 54-cent-per-gallon tariff on imported ethanol.

Republicans face pressure not to eliminate tax breaks unless the savings are redirected to another tax break, lest it be considered an indirect tax increase. Nevertheless, a majority of GOP senators supported doing away with the ethanol subsidy.

The vote came as Vice President Joe Biden held a third consecutive day of closed-door talks with congressional leaders as they seek a bipartisan agreement that would reduce the federal deficit and lead to Congress raising the nation's $14.3-trillion debt limit.

The White House has said the president supports reducing the ethanol tax credit but not eliminating it.

Thursday's vote was a do-over: The ethanol proposal was rejected earlier this week when Democrats opposed it largely on procedural grounds.

lisa.mascaro@latimes.com

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