Benjy Sarlin June 15, 2011, 3:01 PM

Looking to exploit a rare rift between Republicans and anti-tax groups, Sens. Chuck Schumer (D-NY) and Bob Menendez (D-NJ) renewed calls on Tuesday to include revenue increases in any deficit deal.

Some 34 Senate Republicans voted for an amendment ending ethanol subsidies on Tuesday, despite warnings from anti-tax crusader Grover Norquist that dropping tax credits counted as a tax hike. The divide over the issue is complicated and hinges on regional factors in both parties, but Democrats largely voted against the unsuccessful amendment due to stated objections to the procedure by which it was brought up.

On a conference call with reporters on Wednesday, Schumer said the Republican defections were the more significant takeaway.

“The mass Republican vote to end ethanol subsidies was a watershed moment that means tax expenditures are fair game in the now ongoing deficit reduction talks,” he said. “The dam is officially broken, the knee-jerk right-wing opposition to get rid of any subsidies is subsiding.”

Schumer called on Republicans to join Democrats in taking on oil subsidies next, saying that their justification was at least as thin as ethanol’s, given oil companies’ record profits this year.

The ethanol amendment was brought to the floor by Sen. Tom Coburn (R-OK), who used an unusual maneuver to force a vote. The conservative Republican has already battled with Norquist for months on the issue of tax subsidies, ever since he backed the bipartisan Bowles-Simpson deficit plan and its proposed revenue increases. Norquist has accused Coburn, who signed Norquist’s no-tax pledge, of lying to voters, but Coburn argues that ethanol subsidies and similar credits are “tax earmarks” that shouldn’t be treated any differently than wasteful spending.

“I think you all think he has a whole lot more hold than I think he has,” Coburn said of Norquist before the vote. “I don’t disagree with him on a lot of principles. The fact is it’s not a good position to put yourself in when you say, ‘Here’s a tax expenditure that nobody needs, and yet we have to give somebody else a tax cut to take away this.’”

The impact of the break may be a little tougher to assess since Norquist cracked at the last minute and gave Republicans permission to vote for the Coburn amendment if they also voted for an amendment offsetting the subsidy cuts with tax reductions elsewhere. But given the rigidity of the GOP position on tax cuts, any dissension is worth watching closely.

Sen. Menendez told reporters on Wednesday that Republicans would need to follow Coburn’s lead on the tax expenditures issue if they wanted to get a significant deficit reduction package.

“The [subsidy cuts] that we’ve offered are just some of many that could in fact be pursued and we think they’re going to have to be part of a deal,” he said.

Americans for Tax Reform, Bob Menendez, Chuck Schumer, Ethanol, Grover Norquist, Tax Breaks, Tom Coburn