Senate defeats measure to eliminate ethanol tax break

The Senate on Tuesday rejected a proposal to eliminate $6 billion in annual ethanol subsidies in a widely watched test of the GOP’s willingness to close tax loopholes to help lower deficits.

Despite pushback from leaders to scuttle the proposal, Sen. Tom Coburn (R-Okla.) won support from 40 senators--a potential signal that some Republicans are willing to do away with certain tax breaks despite a no-new-taxes stance in debt reduction talks. Sixty votes were needed to advance the legislation.

The vote came as Vice President Joe Biden convened congressional negotiators behind closed doors Tuesday for a three-day marathon round of talks to forge a deficit-reduction agreement that would allow a vote to raise the nation’s $14.3 trillion debt ceiling. Officials have said the borrowing limit needs to be increased by Aug. 2 and avoid a catastrophic federal default.

Coburn argued that tax breaks such as the ethanol subsidy are simply spending by another name. His position has drawn sharp rebuke from conservative activist Grover Norquist, who says doing away with tax credits amounts to a tax hike -- unless the revenue is redirected to tax breaks elsewhere.

The proposal split across party and regional lines. Democrats largely voted against the measure after leaders encouraged a “no” vote on procedural grounds. Coburn used an unorthodox move to bring the bill to a vote.

Dozens of Republicans, including most leaders, supported the proposal, even after leaders offered an alternative with farm-state Democrats that siphoned some GOP support for Coburn’s bill.

Republicans cautioned against reading too much into the vote, saying their desire to do away with the long-controversial ethanol subsidy did not indicate widespread support for eliminating other tax breaks for deficit reduction.