The GOP, Ethanol, and the No-Tax Pledge

By :: June 15th, 2011

A majority of Senate Republicans yesterday took a symbolic but hugely important vote to eliminate $6 billion in tax subsidies for the production of ethanol.  And, so far at least, they have not turned into pumpkins.

The symbolism of their vote should not be underestimated. In a small but important way, 34 GOP senators proved to themselves--if to no one else-- that they can vote to “raise taxes.”  Most had signed the infamous pledge demanded by the self-styled protector of the faith, Grover Norquist, that they would never ever vote to raise taxes on anyone in any circumstances. Now, they have.   

To be sure, this was in many ways an easy vote. The subsidy itself is one of the least defensible in the tax code and it benefits a handful of corn farmers and producers in just a few states. Even the powerful Koch brothers, who have bankrolled many GOP candidates and whose firms benefit from the subsidies, endorsed repeal.

Besides, the Senate actually preserved the subsidy thanks to one of those procedural squabbles that makes it so difficult for the world’s greatest deliberative body to do anything. Plus, there is no chance this measure would pass the House, at least as a stand-alone bill. So this was the classic free vote—a chance for a lawmaker to make a point without actually changing the law.

But the point was a powerful one, at least within the GOP caucus where Norquist and the anti-tax absolutists held sway for years. In recent months they have been challenged by Senator Tom Coburn (R-OK) and a handful of others. Coburn’s conservative credentials are impeccable. He believes fervently in small government but, unlike Norquist, opposes spending subsidies and tax subsidies with equal passion. Most important, Coburn deeply believes in deficit reduction and seems to recognize that serious budget cutting is not possible without a mix of spending cuts and tax hikes.

Yesterday’s vote may provide some additional flexibility for those lawmakers participating in deficit reduction talks led by Vice President Joe Biden. The veep’s  group isn’t going to rewrite the tax code, but it is trying to come up with  a formula around which future talks aimed at cutting the deficit by about $4 trillion over a decade can be built.

There will be much arguing about what that recipe should be. Should it be $1 of tax increases for each $3 in spending cuts? Or perhaps 40/60? That’s the kind of difference-splitting that lawmakers do best. But the point is, the ratio of spending cuts to tax increases can’t be 100/0. Coburn and other smart conservatives understand that voters will choke on breakfast when they see what $4 trillion in spending cuts look like. The public’s overwhelmingly negative response to House Budget Committee Chair Paul Ryan’s (R-WI) plan to replace Medicare may have driven the point home.

Yesterday’s ethanol vote says that a majority of Senate Republicans agree with Coburn. Does that mean they are now ready to package hundreds of billions in tax hikes with spending cuts to make a deficit deal? Not all all.  But they have taken an important step in the right direction.

9Comments

  1. Sid F  ::  1:03 pm on June 15th, 2011:

    The tax breaks will expire at the end of the year, and it seems like they may be dead at that time. One interesting thing is that supporter want to replace the tax break with a subsidy for pumps to blend ethanol and gasoline.

    http://dismalpoliticaleconomist.blogspot.com/2011/06/senate-votes-overwhelmingly-to-continue.html

    Will these people ever quit?

  2. pete  ::  2:17 pm on June 15th, 2011:

    Since when did stopping a subsidy become raising taxes? A subsidy is
    an expenditure. Stopping a subsidy is decreasing spending. Wow!
    You guys sure know how to bend things to fit your agenda.

  3. Michael Bindner  ::  3:22 pm on June 15th, 2011:

    Yesterday’s vote was all symbolism, but it was powerful.

    The most profound thing the Biden group can do is insist that the baseline is the automatic end of the Bush/Obama tax cuts – and that any continuation of those cuts must be matched dollar for dollar with spending cuts or tax reform of a different kind. The sweetener for the GOP should be increasing the number of House Republicans on whatever panel considers long term cuts. The number of House members and Senators should be equal, with each majority getting the same number and each minority getting the same number. The VP can represent Obama and break ties, although frankly, each party in each House should get some kind of signoff – and with the House GOP membership having both Tea Party folks and more seasoned members.

  4. Vivian Darkbloom  ::  3:25 pm on June 15th, 2011:

    Good point, Pete.

  5. AMTbuff  ::  3:57 pm on June 15th, 2011:

    Good news indeed. This tax subsidy is very nearly equivalent to direct spending. Some of the other so-called tax expenditures are not so close to spending. That will not stop advocates of higher revenues to lump them all together with ethanol breaks.

    Tax expenditure pundits treat the tax rate schedule as exogenous, as if someone established the rates without regard to the existence of major tax breaks. That presumption is obviously false. If major tax breaks are repealed, rates should be cut or the argument should be made for higher revenue on its own merits. Those merits are strong, and they will be even stronger after the crucial unsustainable benefit promises have been broken.

  6. Len  ::  10:31 am on June 16th, 2011:

    Pete, I think you need to do a search on “tax expenditures” on the tax policy center website. There are dozens of articles making the point that subsidies run through the tax system are equivalent to spending. Republicans, and especially Grover Norquist, have equated cutting tax expenditures with tax increases, and thus impermissible. That is why the vote on ethanol tax credits was significant.

    For the record, TPC has no agenda other than informing the public.

  7. Melville electricians  ::  12:40 pm on June 16th, 2011:

    This is the ideal blog for anyone who wants to know about this topic. You know so much it’s about tough to quarrel with you. Thanks dude!

  8. Vivian Darkbloom  ::  1:55 am on June 17th, 2011:

    Len,

    In fairness to Pete, and to me, you should re-read Gleckman’s post. There is absolutely no remark in his column that ending the ethanol subsidy (in his view) equates with “spending”. The only reference he makes is to the fact that it equates with a “raise in tax”. Albeit that was in quotes, he didn’t indicate in this post that he disagrees with that view. So, the average reader, such as this one, could very well have been led to believe that Gleckman shared that view.

    Now, re-read the comment by Pete: “Since when did stopping a subsidy become raising taxes? Stopping a subsidy is decreasing spending”.

    On it’s face, Pete got it exactly right. And, on its face, by calling it a “raise in taxes”, Gleckman got it exactly wrong. That’s why I wrote “Good point, Pete”.

    Perhaps I’m not as sufficiently in tune with the cynicism of Gleckman and/or Pete, but things would be a whole lot simpler around here if people just wrote what they mean, particularly if your agenda is to “inform the public”.

    I happen to believe that the ethanol subsidy is equivalent to decreasing spending.

  9. Vivian Darkbloom  ::  4:17 am on June 17th, 2011:

    I mean to write “*ending* the ethanol subsidy is equivalent to decreasing spending is n the above post.