Thune fights for ethanol tax breaks amid battle over budget

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The fate of ethanol tax breaks, near-term and long-term, is wrapped up in a pitched battle over spending on Capitol Hill, and Sen. John Thune, R-S.D., wasn’t promising he could strike a deal on Wednesday.

“We’re getting closer, we have been for a long time. Unfortunately, the goal posts seem to be moving all the time,” Thune told reporters in a conference call.

Thune and Sen. Amy Klobuchar, D-Minn., have been negotiating a deal with Sen. Dianne Feinstein, D-Calif., an ethanol opponent. But Thune sounded weary and said intense work has been going into negotiations for months.

“We’re trying to make the best of a bad situation,” Thune said, noting that earlier this month the Senate voted 73-27 to end $6 billion spent annually on the ethanol blender’s tax credit. While that vote won’t go beyond the Senate floor, it reflects the dim view many in Congress have of ethanol subsidies.

The three senators were set to meet again Wednesday, and Feinstein told The Hill newspaper she thought they were near a deal, while Thune and Klobuchar aides weren’t as optimistic.

The Thune-Klobuchar-Feinstein deal would reflect a bill co-sponsored by Thune that would trade an early end to the blender’s tax credit in exchange for money to put ethanol pumps at gas stations and more money to spur advanced biofuels, such as cellulosic ethanol. Money also would go to reduce the deficit. Feinstein has said she wants the ethanol deal rolled into a much bigger vote on raising the debt ceiling.

Ethanol opponents have set their sights on the gasoline additive, derived primarily from corn in the United States, as congressional Republicans have picked a fight with the Democratic Obama administration over the nation’s spending and debt. Republicans have so far refused to vote to raise the nation’s debt ceiling without accompanying spending cuts. Most in the GOP — including Thune — have said they will not consider tax increases as part of a compromise.

With agriculture as South Dakota’s No. 1 industry, corn farmers and developers in the state have worked to develop an ethanol and biofuels industry. The state is home to the leading global ethanol producer, Poet, as well as other companies.

Meanwhile, on Capitol Hill, the ethanol tax breaks once popular due to the promise of a domestic energy source are now being characterized as wasteful. While the budget battle is intensely partisan, ethanol support and opposition breaks down along geographic lines.

This has put Thune in the position of fighting to maintain some form of federal ethanol subsidies, while also pushing to curb deficit spending and cut the federal debt.

He is one of 47 Republican senators who signed on to a proposal to amend the U.S. Constitution to require a balanced budget.

“We need to get spending cut. That’s a discipline which, unfortunately, has been lacking in the Congress,” Thune told reporters. “This amendment would prevent government from spending more than it takes in. That’s a very common sense way to operate.”

Thune said the U.S. government is “consistently taking in $2.2 trillion and spending $3.7 trillion” per year. “You can’t run $1.5 trillion deficits every year and expect not to go broke,” he said.

The amendment would need 67 votes in the Senate before it could advance to the House. If it passed there, 38 states would have to ratify it before it would take effect.

When asked about closing tax loopholes as a way to increase tax revenue and reduce deficits, Thune called comprehensive tax reform “long overdue.”

“The code is incredibly complex and riddled with exceptions,” he said.

However, he said there is not enough time before the Aug. 2 deadline for a debt ceiling deal to hammer out an overhaul of the tax system.

“The tax reform debate and whether to close loopholes, that should occur but at a later time. I don’t think this is an opportunity to deal with that.”

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