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Senate Reverses, Votes to Cut Ethanol Subsidies

Shift could endanger $5 billion annually for farm states
By Newser Editors and Wire Services
Posted Jun 16, 2011 5:31 PM CDT

(Newser) – The Senate voted today to repeal tax credits for producing ethanol, a vote that budget cutters hope will demonstrate a growing appetite in Congress to end special interest tax breaks to help reduce government borrowing. The Senate voted 73-27 to repeal the $5 billion annual subsidy, just two days after rejecting an identical measure. The tax credit provides 45 cents a gallon to oil refiners who mix gasoline with ethanol, a renewable, liquid fuel additive that comes mainly from corn in the US. It's been a politically volatile issue, not least because of the coming Iowa caucuses.

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The measure will now be added to a bill renewing a federal economic development program. The prospects for the overall bill are uncertain, but today's vote clearly endangers the ethanol tax credit, which would expire at the end of the year anyway, unless Congress renews it. "The best way for ethanol to survive is to stand on its own two feet, without spending something we don't have to get something we're going to have anyway," said Sen. Tom Coburn, R-Okla. (Read more ethanol stories.)

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