California Senator Diane Feinstein is part of a new deal to ease the national debt, by ending a tax credit for states that produce ethanol-based fuel.
Feinstein, alongside Senators Amy Klobuchar, D-Minn., and John Thune, R-S.D., have proposed diverting $1.3 billion of the money remaining for the tax break this year to pay for debt reduction. And $668 million of the remaining funds will be used for incentives for the ethanol and biofuels industries.
If accepted by the White House and the House of Representatives, the compromise could provide a quick path to end the ethanol credit as part of budget negotiations between Congress and the White House. The Senate voted last month on an amendment to end the $5 billion subsidy, but the fate of the legislation to which it's attached — a bill renewing a federal economic development program — is uncertain.
The ethanol industry once enjoyed strong support from Congress, but it has suffered as lawmakers have looked for ways to cut budgets and have started to question why the industry still needs government help after three decades of production. The Senate vote last month signaled that the tax credit, scheduled to expire at the end of the year, was probably doomed.
The compromise between the three senators would end the tax credit at the end of this month and would allow the ethanol industry to salvage at least some of the federal subsidy money.