In an encouraging vote last week, a bipartisan Senate majority approved a repeal of the ethanol tax credit. Although the repeal is not expected to become law, the 73-27 vote raised the possibility of further bipartisan agreement on the elimination of such “tax expenditures” to reduce federal deficits.
Tax expenditures are government subsidies that increase the deficit, but they tend to receive far less public attention and congressional scrutiny.
Yeas and nays on the ethanol subsidy were nearly evenly divided among Democrats and Republicans. Why would reducing a tax expenditure receive such broad support? Because it raises revenue without increasing marginal tax rates (so Republicans can support it) and it cuts spending without eroding programs that favor lower-income households (so Democrats can accept it).
That’s why the President’s fiscal commission -- and many other bipartisan groups -- have recommended reducing tax expenditures to help achieve fiscal sustainability.External links:CBO: Using Biofuel Tax Credits to Achieve Energy and Environmental Policy GoalsJCT: Estimates of Federal Tax Expenditures for Fiscal Years 2010-2014Senate Roll Call Vote