WASHINGTON – The Senate rejected a proposal Tuesday to do away with annual ethanol subsidies in a vote that was closely watched for clues about the willingness of Republicans to take on tax breaks and loopholes.
Despite the measure’s defeat, conservative Sen. Tom Coburn, R-Okla., won support from 40 senators to end the ethanol credit. That was interpreted as evidence that some Republicans are willing to close loopholes despite the conservative view that such steps are tantamount to tax hikes.
“You have a good number of Republicans that are willing to close tax loopholes for deficit reduction,” said Rep. Chris Van Hollen of Maryland, a negotiator for House Democrats on deficit talks. “That should be a good example.”
Many Republicans consider any action resulting in more federal revenue to be a tax hike. Democrats argue that ending tax breaks and closing loopholes are essential to reducing deficits. The issue is a sticking point in negotiations over the federal debt and budget deficits.
The Senate vote came as Vice President Joe Biden began a three-day round of talks with congressional negotiators to raise the nation’s $14.3 trillion debt limit by Aug. 2. Treasury officials have said the nation risks a potentially catastrophic default without action to raise the debt ceiling.
“We’re making good progress,” Biden said after leaving the closed-door meeting. The group is scheduled to resume talks this morning.
Proposals for spending cuts dominated Tuesday’s talks, and an aide familiar with the negotiations called the discussion “robust.” The talks focused on domestic spending as the GOP seeks to cut “trillions” over the next decade.
The White House also suggested expanding a 2 percent reduction in payroll taxes paid by employees to employers, an effort to stimulate the economy.
Tuesday’s Senate vote on ethanol subsidies spotlighted the debate over taxes and deficits. The ethanol subsidy provides a federal tax credit of 45 cents a gallon to those who blend ethanol with gasoline.
The Government Accountability Office said in a report earlier this year that the credit is duplicative and no longer necessary. But farm-state senators argued the tax remains important and should not be singled out for elimination.
Coburn and other critics have argued that the ethanol tax break is federal spending by another name, amounting to $6 billion a year.
“There’s nothing about this that makes sense,” Coburn said during the Senate debate.
The vote split across parties and regions. Many Democrats voted against the proposal when leaders encouraged a “no” vote on procedural grounds after Coburn used an unorthodox move to bring the bill to a vote.