The feud between Sen. Tom Coburn (R., Okla.) and tax lobbyist Grover Norquist came to a head (again) this week as Republicans girded themselves for a potential deal on the debt ceiling. Sparks flew Tuesday when Coburn forced a cloture vote on an amendment to eliminate $6 billion in ethanol tax subsidies. Ethanol, however, was hardly the issue at stake.
GOP leaders have made it clear that Republicans will not support a deal to raise the debt ceiling if it includes tax increases. But as Tuesday’s vote showed, not all Republicans agree on what constitutes a “tax increase.” At issue is the “Taxpayer Protection Pledge” that Norquist, president of Americans for Tax Reform, urges all GOP lawmakers (and any willing Democrats) to take. All but seven Republicans in the Senate — including Coburn — and all but six in the House have signed on. Signers promise to oppose any tax increase as well as “any net reduction or elimination of deductions and credits, unless matched dollar for dollar by further reducing tax rates.”
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Coburn’s amendment eliminated tax breaks for the ethanol industry but did not include any offsetting tax cuts. The Joint Committee on Taxation estimated that his proposal would raise $2.4 billion in new tax revenue over the remainder of the year, which Coburn intended to put toward reducing the deficit. Norquist, therefore, denounced the amendment as a violation of the pledge.
The vote failed, 40 to 59, well short of the 60 needed for cloture, but the fact that 34 Republicans supported the amendment raised eyebrows on Capitol Hill as perhaps a sign that Norquist and his pledge have lost clout in the GOP conference. Coburn certainly touted it as such. “That’s 34 Republicans who are willing to say this is more important than a signed pledge to ATR,” he told reporters after the vote. “I think you all think [Norquist] has a whole lot more hold than I think he has.” Then, in a follow up statement, he added: “Taxpayers should be encouraged that Republican senators overwhelmingly rejected the ludicrous argument that eliminating tax earmarks is a tax increase.”
Norquist vociferously denies this charge, pointing out that ATR gave senators the go ahead to vote yes on Coburn’s measure provided they also agreed to support an amendment by Sen. Jim DeMint (R., S.C.) that would have made up for the lost tax credit by eliminating the inheritance tax. There has been no vote on that measure yet, and it’s not clear when or if a vote will happen, but most Republicans have voiced support. “No one violated the pledge,” Norquist said. “Nobody followed Coburn over the cliff.”
Norquist accuses Coburn of trying to trick colleagues into supporting a tax increase in order to undermine the Republican position in the ongoing debt negotiations. “He’s trying to screw the rest of the Republican party because he is so mad at the world,” Norquist tells NRO. “He didn’t want to get rid of the ethanol tax credit without raising taxes. The important thing in his life was raising taxes.”
In fact, Norquist has been at odds with Coburn ever since the senator voted in support of the Bowles-Simpson deficit commission’s final report, which Norquist describes as “a massive $2 trillion tax hike” and a blatant violation of the ATR pledge. He has constantly criticized Coburn’s involvement in the “Gang of Six” talks, as well as his stated willingness to negotiate when it comes to taxes. Norquist says Coburn’s statements after the vote make it clear that his amendment had nothing to do with ethanol subsidies and everything to do with forcing Republicans to go on record supporting a tax increase — essentially a gateway drug that would inevitably lead to additional increases down the road. “He said, ‘Ha ha, popped your cherry, lost your virginity. Now give me $2 trillion in tax increases,’” Norquist says. “As soon as they voted, he turned around and called them sluts. Guys like that didn’t get second dates in high school.”
And even worse, Norquist argues, the vote played right into the Democrats’ hands by letting them cast Republicans as amenable to tax increases. Indeed, a number of Democrats put out statements to that effect, some spinning it as good for the country and others alleging Republican hypocrisy. “[Coburn’s] willingness to cut special-interest tax breaks for the purpose of deficit reduction is encouraging,” said Rep. Chris Van Hollen (D., Md.), ranking member on the House Budget Committee. Democrats in Massachusetts wasted no time attacking Sen. Scott Brown (R., Mass.) — up for reelection in 2012 — for “breaking promises” by violating the ATR pledge.
Norquist's argument is lame. I'm behind Coburn and Club for Growth. Eliminating a harmful subsidy is not at all the same as a tax hike. Eliminating the subsidy will lead to prosperity.
Grover Norquist appears to have turned into some sort of media hound. If a person can not see the logic in eliminating subsidies (and mandates while we're at it btw) of a program than makes neither fiscal or philosophical sense in the midst of staggering budget deficits then I don't know what is to be done with then. I'm sure he feels self satisfied with his own libertarian ideological purity, but the country and the economy is going to hell in the meantime. Cutting spending should be the first priority of any right thinking person at this point in time. I personally feel overtaxed, but we simply must control these budget deficits or risk economic collapse. If those on the right can't reach a consensus that such an obviously idiotic program as ethanol subsidies should be eliminated, then what hope do we have?
Well, removing subsidy, without removing ethanol usage mandate, is essentially a tax hike on all citizens - we'd all have to pay higher price [it's not like we have any choice].
You make an assumption here that I think is not valid when you say that it would be equivalent to a tax hike on all citizens. This assumes that the benefits of the ethanol subsidy flow down to the majority of taxpayers. This would assume I submit, that mandating that all gasoline contain 10% ethanol and then subsidizing the ethanol results in lower fuel prices at the pump. As far as I have been able to determine, this is not the case. In fact, it appears that mandating that gasoline contain 10% ethanol slightly raises gas prices in spite of the subsidy. If this is true, then clearly the benefits of the subsidy are falling almost solely on the corn producers and distillers. So, eliminating this subsidy is eliminating a special favor to a very narrow class and is not equivalent to a general tax increase on the public at large. Since there is no requirement (absent the mandate) that gasoline contain ethanol, it does not follow that removing the subsidy raises everyone's taxes.
The story version is that ethanol subsidies were a dumb idea from the get go. They don't reduce dependance on oil and they definitely do increase food prices. The first rule of reasonable behavior is that when you discover that you're doing something stupid, you stop doing it.
BTW, I wonder if Grover Norquist has considered the hidden tax that all Americans are paying in the form of higher food price due to the diversion of acreage to the production of corn for ethanol? I suspect his thinking is a little too rigid to have gotten that far.
Eliminating government support for the ethanol scam would be reward enough by itself. No one is more anti-tax than me; I don't even want to "reform, restructure and flatten the income tax" because I know it will very quickly be unreformed, re-corrupted and made progressive again as sure as rain in Spain falls mainly on the plains. I want to do away with the income tax and replace it with a simple (not VAT!!) sales tax and end all capital gains taxes, corporate taxes and inheritance taxes. Nor do I think we can get ourselves out of this debt mess by austerity alone -- we need robust economic growth.
That noted, a credit is not the same thing as a deduction. It is a federal payment, and in the case of ethanol, subsidizes bad fuel policy, bad food policy and bad economics.
Grover's usually right, but he's also habitually rigid, occasionally hysterical and not a little ego-driven. If he keeps this kind of nonsense up he's also going to find himself irrelevant.
Elimination of the subsidy will certainly change the bottom line for the people who have been receiving it. They'll probably change their pricing to restore their bottom line - if they succeed, then the economy (as a whole) will "pay the same."
Theoretically, the only reason you offer a subsidy is because ethanol can't compete without it. We may discover that ethanol producers can't raise prices enough to recapture all the subsidy they lost, in which case ethanol will "cost" us less.
If we believe in the market, subsidies cost more - do we really need to be encouraging production of a product that's not as efficient, etc. as the unsubsidized competition?
Elimination of the subsidy is only one part of restoring the market - eliminating the mandates & tariffs on importing ethanol should be on the list too.
The use of ethanol in gasoline is MANDATED;refiners HAVE to use it,thus ethanol suppliers have a captive market. They can raise prices and gas refiners MUST buy ethanol from a domestic source,so they will have to pay a higher price for it,and that trickles down to the end users.That is US citizens and service providers that use transportation. Prices of goods and services will rise.Again.
the only realistic solution is to produce our own domestic oil sources,drilling and refining it here in the US. More jobs,lower gas prices,more revenue to the gov't through increased income taxes.
Norquist has lost me. This is a huge paradigm shift. A big win in the right direction toward less government intervention and more free market processes.
Does anyone have any idea why Coburn didn't include the repeal of the mandate in his amendment? And how is this ethanol mandate that different from Obamacare's individual mandate?
“Taxpayers should be encouraged that Republican senators overwhelmingly rejected the ludicrous argument that eliminating tax earmarks is a tax increase.”
Eliminate the subsidy AND repeal the rediculous and counter productive mandate or get the hell out. Do not raise the debt ceiling, cut spending, eliminate loopholes and cut taxes or get the hell out. End of story. We The People are watching this circus with disgust and contempt.
I wouldn't blame Grover's libertarianism on this, as this libertarian is on Coburn's side. Would be nice to ditch the mandate and tariffs on ethanol imports too (although with the mandate gone, the tariff is kind of a moot point), but getting rid of this noxious subsidy is a start in the right direction.
The purpose of the subsidy was to help the ethanol industry get a toe hold. It clearly is no longer needed, so the subsidy is unnecessary and should be eliminated. If Norquist wants to argue against federal excise tax on gasoline, then let him make that case, but shut up about the ethanol giveaway.
How long before defunding Planned Parenthood or the Department of Education is considered a tax increase Mr. Norquist?
Yes, it would be nice that, having decided to spend $6B less they would have returned the money to those who paid for it, us, the taxpayers. But it's not like this is an EXTRA $6B they just had lying around. This is $6B they had to borrow from the Chinese. Is he sugesting we return that to them? If so, then wouldn't that reduce the deficit just like Coburn is trying to do anyway?
Norquist has become little more than a blind ideologue.
I get it with regard to eliminating tax cuts or subsidies, that it results in more money for a Leviathan we are trying to starve. But insisting on one-for-one for everything is too rigid to be useful.
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