Coburn’s right on ethanol subsidies

The lingering feud between Sen. Tom Coburn (R-OK) and Grover Norquist, head of Americans for Tax Reform, was punctuated last night when Coburn’s amendment to end ethanol subsidies failed to garner the necessary 60 votes in the Senate. Coburn says he won because 34 of 44 Republicans voted to end the subsidies. Norquist says he won because his amendment didn’t pass. Technically, Norquist is right, since for now the policy isn’t changing and ethanol producers can continue receiving $5 billion a year in government subsidies. But Coburn is right on the policy and the fact that 77% of his GOP colleagues voted to end the ethanol subsidies is a good sign for policy (and politically) minded Republicans.

It’s not that Norquist is a fan of ethanol, but he’s been insistent that if tax credits for ethanol are repealed, there must be a corresponding tax cut somewhere else, preferably across-the-board. Otherwise, he says, it’s simply a tax increase on ethanol producers, plain and simple, and tax hikes, no matter how they are defined, are bad public policy. Since Coburn’s amendment didn’t take the money that would have been raised by ending the ethanol subsidies and redirect it to across-the-board tax cuts, Norquist opposed the plan. Coburn simply wanted to use the ethanol subsidies to pay down the deficit.

Norquist’s opposition is unfortunate both in policy and politics. On the policy level, there should be very few, if any, tax expenditures (credits, subsidies) in the tax code. If government wants to subsidize something, it should do so through a line item in a spending bill. Had this been the case, then Coburn’s amendment simply would have been to strip funding for ethanol producers and Norquist would have happily agreed.

At a political level, there are few better places to begin demonstrating to voters the GOP’s commitment to cutting the budget than ending tax subsidies for ethanol. Unless you live in Iowa, Coburn’s amendment is probably supported by 70% of the electorate.

Norquist did support an amendment authored by Sen. Jim DeMint (R-SC) that would have ended the ethanol subsidy and the death tax (thereby making the complete package a net revenue reduction). That amendment didn’t go anywhere. And DeMint, often referred to as the Senate’s tea party leader, voted for the Coburn amendment anyway.