Senate: End ethanol credit

WASHINGTON – The Senate voted to do away with an ethanol tax credit, an indication of waning support for subsidizing the industry as the nation grapples with deficit spending and spiraling federal debt.

Still, the tax credit will likely continue for some time as the legislation was attached to a stalled economic development bill that faces opposition in Congress.

The 73-27 vote on Thursday to advance the proposal that would end the credit drew support from across party lines as senators from farming 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 authored the bill with Sen. Tom Coburn, R-Okla.

The 45-cent-per-gallon tax credit is offered to companies that blend ethanol with gasoline. But the Government Accountability Office said earlier this year the incentive was no longer necessary after 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.

Despite pressure on Republican senators to not indirectly permit a tax hike by eliminating the nearly $6 billion annual subsidy without redirecting the savings to another tax break, a majority of GOP senators gave their support.

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 does not support a full repeal.