Thursday, June 09, 2011

Whirlpool Won’t Pay 35% Corporate Income Tax,
it Will Pay 0%

March 6, 2011 by Jane Jamison

From WSJ via the Tax Prof blog.

This will infuriate you if you are doing your income taxes.

WSJ: Whirlpool Parlays “Green” Credits Into Zero Tax Liability

Whirlpool Corporation recorded $18 billion in global sales and $619 million of earnings in 2010 but won’t pay anywhere near the U.S. statutory tax rate of 35% on those profits. Its effective tax rate will be 0%.

As Bloomberg first reported last week, Whirlpool has stockpiled more than $500 million in tax credits for making energy-saving “energy star” appliances—washers, dryers, refrigerators and so on. The firm gets a production tax credit of up to $200 per refrigerator, $75 per dishwasher, and $225 per washer and dryer. General Electric has also collected about $200 million of these credits.

Think of these energy efficiency tax carve-outs as a version of the earned income tax credit for corporate America. Except Whirlpool and GE aren’t poor.

The deal gets sweeter. Those credits can be carried over from one year to the next for up to 20 years. Whirlpool is collecting so many credits that it may not have to pay a dime of corporate income tax for years. The lost revenue from GE and Whirlpool alone far exceeds the $78 million revenue “cost” over 10 years that Congress’s Joint Committee on Taxation predicted for the credits. …

Special favors like these also create a business constituency against tax reform that would benefit the overall economy. Whirlpool carries its $500 million of unused tax credits as an asset on its balance sheet, so cutting tax rates shrinks the book value of that asset. “This is why so many companies actually oppose lowering tax rates,” says Scott Hodge, president of the Tax Foundation.

The White House claims to want to reduce corporate tax rates in a “revenue neutral way” by closing loopholes. Yet it’s hard to take that commitment seriously when its new budget proposes to extend the green-credit windfall for another year. Whirlpool is one more case study in the case for corporate tax reform.


Anonymous said...

Actually, all taxes are passed onto the consumer regardless of product. Corporations, big and small businesses only collect taxes. They have a profit margin that will not vary much. When politicians call to tax these entities, they are really saying to increase the tax on those that buy the product (the middle and lower class). We loudly say "yes" and then we pay the hidden taxes ourselves. Government gets richer and more powerful to dictate your lifestyle. You get poorer and more controlled by those elite politicians. Think about it!

Anonymous said...

Corporations are taxed on profit which is the amount they charge the consumer in excess of the cost to provide the product. There are a variety of loopholes that allow some corporations to escape taxation even though they have a profit. The higher the tax rate, the greater the motivation of the corporation to look for loopholes.

Taxes are the cost of services provided by the government. There is nothing wrong with including a corporation's share of government services in he cost of the product just like the cost of non government services, like executive compensation, is included in the cost of the product. Companies can raise the price if taxes increase only if consumers continue to purchase the product. The recent recession has demonstrated that companies who want to stay in business have to keep prices down. Raising taxes won't cause a price increase but if the tax rate becomes high enough, it will increase the motivation to look for loopholes.

Anonymous said...

We know who creates the loopholes. The assumption is that these are needed government services. The goverment creates a crisis and then proudly claims they have the solution. For example, when did the health care crisis start as it has always been this way. In the 1970s we were headed towards a new ice age and when the money ran out for research it changed to global warming. The federal government is inefficient followed by the state government. I guess in the case of Whirlpool, they could move to a state with favorable loop holes as one will fill the void. That would be interesting for the Michigan tax base.