"The overwhelming support of the Finance Committee for my amendment to extend the ethanol highway tax exemption through the year 2007 represents a huge victory for America's farmers and rural workers," Grassley said. "A serious battle lies ahead as we go into the Senate/House conference committee. But with last night's victory, we move forward with very significant leverage. I am committed to continuing to work and work and work not only to save ethanol from the attack by big oil to but to extend the incentive for ethanol production."
By a vote of 16 to 4, Grassley won passage by the Senate Finance Committee of his amendment to extend the ethanol exemption from the highway excise tax through the year 2007. Current law has the ethanol tax incentive expiring at the end of 2000. President Bill Clinton has called for its extension to the year 2005. Grassley's proposal amended the comprehensive tax relief package which was approved late Thursday night by the Senate tax-writing panel.
Under the Grassley amendment, the ethanol tax incentive would remain at its current 5.4 cents through the year 2000. It would be reduced to 5.3 cents in the years 2001 and 2002, reduced to 5.2 cents for the years 2003 and 2004, and reduced to 5.1 cents for the years 2005, 2006, and 2007. Improving cost-efficiencies in ethanol production allows for outyear subsidy reductions.
House Ways and Means Committee Chairman Bill Archer of Texas has sought to repeal the ethanol tax incentive. Earlier this month, Archer turned back a hard fought committee-level effort led by Rep. Jim Nussle of Iowa to restore the ethanol highway tax exemption through the year 2000. Archer represents an area of Houston, Texas, which is home to some of the country's biggest MTBE manufacturers. MTBE is an octane fuel enhancer that competes directly with ethanol, and would greatly benefit by ethanol's demise.
Grassley said the tremendous support for ethanol demonstrated last night by the Finance Committee will strengthen the hand of Nussle and House Speaker Newt Gingrich in their efforts to repeal Archer's anti-ethanol provision from the House tax relief bill. "Extension of the ethanol incentive is essential to continued investment in expanded ethanol production throughout the Midwest. I will be carrying the fight for ethanol wherever I have to -- in conference, with the highway bill, next year, or next Congress. I will not let up until the ethanol market for rural workers and farmers is secure well beyond the year 2000," Grassley said.
During Finance Committee consideration Thursday night, Grassley won support for his amendment from nine Republican and seven Democrat senators. Grassley emphasized that supporters included key Senate leaders who also serve on the Finance Committee, including Majority Leader Trent Lott of Mississippi, Energy Committee Chairman Frank Murkowski of Alaska, Judiciary Committee Chairman Orrin Hatch of Utah, Environment Committee Chairman John Chafee of Rhode Island, Labor Committee Chairman James Jeffords of Vermont, Banking Committee Chairman Alfonse D'Amato of New York, and Republican Conference Chairman Connie Mack of Florida. Grassley also won support on the Finance Committee from Sen. Phil Gramm of Texas. Grassley said he also hopes to ultimately win the support of Finance Committee Bill Roth of Delaware. Roth did not support the Grassley amendment last night, but Grassley said the Chairman was voting against amendments to discourage others from being proposed.
In 1997, ethanol production increased employment by 195,200 jobs, both on and off the farm. Grassley said Iowa gains more than any other states with 42,000 jobs. "The ethanol market is now one of the largest markets for corn, and it will increase net farm income by $4.5 billion this year. What's more, ethanol is key to reducing America's growing dependence on foreign oil," he said.
The Senate Finance Committee passed by a vote of 18 to 2 the tax package containing the Grassley ethanol amendment. The measure must be reconciled with that advanced by the House of Representatives before it can be sent to the White House for the President's signature.
Grassley is the third most senior member of the tax-writing committee in the Senate.