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Lower rate for ethanol credit likely

DANIEL LOOKER 12/09/2010 @ 11:14am Business Editor

Democrats in Congress who don't like the tax extension compromise worked out between the Obama administration and Republicans are still fighting for changes in the tax break extension.

One of them, Senator Tom Harkin of Iowa, told Agriculture.com Thursday that he's seeking support from the White House for mandating more flexible fuel vehicles and supporting blender pumps if the current tax credit of 45 cents a gallon is lowered in the tax bill.

"They have taken no position on this. I'm talking to them," Harkin said.  

Those changes would allow more access to the market for ethanol and changes such as requiring auto makers to adapt more vehicles to burn up to 85% ethanol wouldn't be a direct cost to the federal government.

"I'm trying to get them interested in market expansion, which doesn't cost them anything," Harkin said.

Harkin acknowledged that entire ethanol tax subsidy is under attack, with an anti-ethanol tax credit editorial in today's Washington Post as the latest sign.

"There's a big push by East Coast and West Coast Democrats and Republicans to get rid of the blenders tax credit," he said.

Harkin said he doesn't expect the ethanol tax credit opponents to succeed. 

Some of the same California opponents of ethanol tax credits are trying to get tax credits for other renewable energy--wind and solar, extended in the same tax legislation.

On the ethanol credit, Harkin said, "I don't think it will go any lower than 36 cents. That's sort of where we are right now."

That's the level that was in a Senate tax bill offered by Finance Committee Chairman Max Baucus (D-MT) that was defeated last Saturday. It's also the level favored by members of the House Ways and Means Committee. 

Earlier this week Harkin's Iowa colleague in the Senate, Republican Chuck Grassley, said he was still fighting to keep the 45 cent level for the ethanol tax credit. 

Some ethanol trade groups are fighting to get the credit extended more than one year. The current credit, which expires December 31, was authorized by Congress five years ago.

Unlike Grassley, who supports the tax compromise, Harkin said he was leaning toward voting against it but wouldn't say that he definitely would not support the tax bill.

Harkin said his main reason for opposing the compromise is the estate tax exemption being raised to $5 million per spouse for the next two years. That will benefit only the wealthiest of Americans while increasing the deficit, he said.

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