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Will a tax deal leave out ethanol credits?

DANIEL LOOKER 12/02/2010 @ 12:27pm Business Editor

As behind-the-scenes negotiations of the fate of Bush-era tax cuts continue, one senator who supports keeping a tax credit for ethanol said Thursday that he’s not certain of its fate.

Senator Tom Harkin, a liberal Democrat from Iowa who says he’s willing to battle GOP efforts to maintain tax breaks for the wealthiest Americans on Christmas day if necessary, said he doesn’t know what will happen to another tax break that’s scheduled to expire at the end of this month, the 45¢ per gallon tax credit for ethanol.

“All I can say is I’m going to fight hard for it,” Harkin told Agriculture.com.

The Volumetric Ethanol Excise Tax Credit (VEETC) has come under widely publicized attack this week.

On Monday a letter calling for the end of VEETC went to congressional leaders from a coalition of interest groups that spans the right and the left of the political spectrum (MoveOn.org and FreedomWorks, which backs the Tea Party).

“At a time of spiraling deficits, we do not believe Congress should continue subsidizing gasoline refiners for something that they are already required to do by the Renewable Fuels Standard,” said the group, which also includes The American Meat Institute, Public Citizen, the National Catholic Rural Life Conference, and the Grocery Manufacturers Association.

That was followed a day later by a letter to the Senate leadership, Harry Reid (D-NV) and Mitch McConnell (R-KY) from 17 senators led by Dianne Feinstein (D-CA) and Jon Kyl (R-CA) urging them to allow VEETC and the tariff on imported ethanol to expire. The group contends that the ethanol tax credit will cost the Federal Treasury $31 billion over the next five years.

Senators Harkin and Chuck Grassley (R-IA) are among 15 who have written Reid and McConnell urging them to keep it. They argue that ending the tax credit would cost more in lost jobs, higher fuel prices and imported petroleum.

Harkin said that all of the tax issues, including estate taxes and tax rates for individuals, will likely be part of an omnibus bill that originates in the House Ways and Means Committee. But, he said, an agreement will be negotiated by the Obama Administration and Democratic and Republican leaders of Congress before anything comes up for a vote.

Among those negotiators is Max Baucus, the Montana Democrat who heads the Senate Finance Committee.

“Baucus, he’s supportive of it,” Harkin said when asked about who among the negotiators is backing an extension of VEETC. “We’ve got good bipartisan support, but not everyone is on Senate Finance.”

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