What constitutes a tax increase is at the heart of a battle between Sen. Tom Coburn, a Republican from Oklahoma, and Grover Norquist, president of Americans for Tax Reform.
Coburn has introduced a measure to eliminate tax credits or deductions that subsidize production of ethanol from corn by nearly $6 billion a year. As much as 40 percent of the nation’s corn crop is diverted to make an alternative fuel which is blended with gasoline. The tax credit goes to fuel blenders, including major oil companies.
Getting rid of the subsidy, long a sacred cow, is a “good thing,” Norquist says. But Norquist reasons that if you decrease revenue to the government by getting rid of tax credits or deductions, it will constitute a hidden tax increase to all taxpayers because the government will spend the money and obtain the lost revenue by increasing taxes overall.
Working with Sen. Jim DeMint, the South Carolina Republican, Norquist has come up with a solution. It’s an amendment DeMint plans to introduce to legislation reauthorizing the Economic Development Administration to eliminate both the ethanol subsidy and all taxes on estates, known as the death tax.
Norquist’s dispute with Coburn goes back to the senator’s support of tax hikes recommended by the Bowles-Simpson National Commission on Fiscal Responsibility and Reform appointed by President Barack Obama to attack the deficit problem.
“Coburn voted for the Obama Commission Report, which calls for $2 trillion in tax hikes,” Norquist tells Newsmax. “ATR suggested this was unwise and bad for the economy. Coburn wrote ATR a public letter promising he would never support any compromise that raised taxes. He would only support encouraging revenue flowing from higher growth.”
In fact, Coburn signed ATR’s Taxpayer Protection Pledge, in which he specifically promised to “oppose any net reduction or elimination of deductions and credits, unless matched dollar for dollar by further reducing tax rates.” But Coburn “began aggressively pushing the idea that any fiscal deal must have tax hikes,” Norquist says. “Coburn suggested that getting rid of tax credits or deductions without offsetting tax decreases is not a tax increase. We worked with Sen. DeMint, and he has an amendment to end the ethanol mandate and end the death tax.”
Coburn argues that his measure is necessary to help forge a compromise with Democrats on a viable plan to rein in the spiraling national debt. “I’m not for tax increases, but I don’t think this is a tax increase,” Coburn told The Washington Post. “This is stupidity at its height. If you vote to give the richest oil companies in this country $3 billion between now and the end of December, then you don't get it. You are absolutely confused about what the problems are in this country.”
Unlike Coburn’s measure, DeMint’s amendment eliminates a mandate that requires refiners and importers to offer specified amounts of ethanol. Promoted by farm states, the requirement is meant to improve the environment but has boosted the price of corn.
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