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Senate Votes to Kill Ethanol Subsidy

The Senate on Thursday dealt a huge blow to the corn lobby but injected fresh optimism into hopes for a bipartisan deficit reduction deal.

Senators voted 73-27 for an amendment by Sens. Dianne Feinstein (D-Calif.) and Tom Coburn (R-Okla.) that would eliminate the 45-cents-a-gallon ethanol tax subsidy and a 54-cent tariff on imported ethanol.

Although it passed easily, the underlying bill — a reauthorization of the Economic Development Administration — isn’t likely to become law, and even if it did, the ethanol provision would likely be rejected by the House because revenue bills must originate in the other chamber. Instead, corn-state Senators and ethanol opponents are negotiating a compromise that would still cut the deficit and eliminate the subsidy, said Sen. Amy Klobuchar (D-Minn.), an ethanol supporter.

Coburn said Senate Majority Leader Harry Reid (D-Nev.) has agreed to allow the amendment on a future revenue bill from the House. He also said he expects the issue, and other similar tax earmarks, to be considered during the debt limit talks chaired by Vice President Joseph Biden.

Those negotiations resume at 4 p.m. Thursday.

The overwhelming vote came after Senate Democratic leaders worked to defeat an identical amendment earlier this week because they objected to how Coburn brought it to the floor.

The ethanol lobby, however, succeeded in killing an amendment by Sen. John McCain (R-Ariz.) that would have prohibited federal subsidies for ethanol blender pumps or storage facilities.

Anti-tax advocate Grover Norquist’s group, Americans for Tax Reform, warned Republican Senators that if they vote for a final bill that eliminates a tax break to reduce the deficit, they will be in violation of his anti-tax pledge that most of them have signed.

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