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Congressional vote could end ethanol tax

Sen. Tom Coburn (R-OK) questions witnesses about privacy on mobile devices during a hearing on Capitol Hill.

STEVE CHIOTAKIS: Meanwhile, tomorrow in the Senate, there'll likely be a vote on whether to end federal ethanol subsidies. The 45 cent a gallon tax credit for ethanol, the blended mixture of gasoline and corn, cost the federal government nearly $5.5 billion last year. And the sponsor of the ethanol-scrapping amendment, Oklahoma Republican Senator Tom Coburn, says that money is needed to help balance the budget. But some conservative groups such as Americans for Tax Reform, headed by Grover Norquist, say ending the subsidies is like raising taxes.

Senator Coburn is with us on the phone to talk about the legislation. Good morning sir.

TOM COBURN: Good morning.

CHIOTAKIS: Why end the ethanol subsidy?

COBURN: Well first of all, we can't afford it -- number one. For the $6 billion that we will have paid out this year, we will have borrowed $2.5 billion from the Chinese to pay it. Number two is we're subsidizing the blending of ethanol. We have a federal law that mandates they have to blend it anyway. And oh by the way, they don't want the money. We have a letter from all the blenders saying, "We don't need this money."

CHIOTAKIS: So what's been keeping the subsidy in place then?

COBURN: The farm belt legislators.

CHIOTAKIS: And this is all a political game do you think?

COBURN: Well, I don't know it's a political game. You know, 40 percent of our corn is going to be used to make ethanol this year and yet, the price of food is skyrocketing. And so we've created a false demand for this. What we really need to do is utilize our own resources and I'm not against ethanol, I just don't think we ought to necessarily incentivize it with our tax dollars.

CHIOTAKIS: And speaking of incentives, though, what about the subsidies that go to oil and gas producers as well.

COBURN: I think that's a legitimate point to raise, but there is no actual subsidy. What there is tax expenditures that are not tax credits. We certainly shouldn't subsidize with direct tax payer money to cause somebody to do something. We don't do that at all in the oil and gas industry.

CHIOTAKIS: Would you be in favor of re-looking at some of those oil and gas --

COBURN: What I want to do is look at the whole tax code because what we've done is we've misdirected capital in the tax code. And if in fact we change those things, what we'll see is we can lower tax rates and actually get more revenue for the federal government.

CHIOTAKIS: What about the critics who say, and by critics I'm talking about obviously Grover Norquist, saying the end of the ethanol subsidy is akin to a tax increase.

COBURN: I don't think anybody in America is going to believe that. When we go borrow money to pay the largest oil companies in the country to blend ethanol into gasoline, that's just not spending money that we could save. And so I don't think it has anything to do with being a tax increase.

CHIOTAKIS: Senator Tom Coburn from Oklahoma, Senator thank you.

COBURN: You're welcome.

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