One of the key proposals by Dr. Larry Bucshon, the Republican candidate for the US House in Indiana’s Bloody 8th District, is to reduce precipitously the federal income tax rate from 35% to 20% for all corps, big and small. This 43% tax drop, if enacted, would continue annually into perpetuity under Dr. Bucshon’s tax plan, and thus should significantly increase the after-tax earnings, and thus also the stock prices, of large multinational corps, including Whirlpool.
For the many US corps that have shipped tons of US jobs overseas, like Whirlpool has, there is also another additional huge windfall tax benefit under Dr. Bucshon’s tax proposal. Whirlpool has $2.4 bil of Unremitted Foreign Earnings at Dec 31, 2009, which should have increased markedly further in 2010, since it increased by $.6 bil, or by 33%, just in the year 2009. These Unremitted Foreign Earnings relate to Whirlpool’s foreign earnings, due in large part to offshoring of US jobs, that have been taxed at mostly lower foreign tax rates overseas, and have remained overseas. From Whirlpool’s income tax footnotes in its SEC filings, you can see that Whirlpool has gotten substantial foreign tax breaks from its foreign earnings.
These Unremitted Foreign Earnings are not federal income taxed in the US until Whirlpool repatriates these foreign earnings back to the US. It gets a bit complicated since you probably have more than one country involved here where those foreign earnings have been earned and are still parked, since there are some foreign taxes that have been paid locally on these foreign earnings, and since you have to gross up these foreign earnings to compute the taxable dividend income amount for US federal income tax purposes, to get them on a pretax basis, when these foreign earnings are repatriated back to the US.
But when Whirlpool repatriates these foreign earnings to the US, they presently would be federal income taxed in the US at the 35% federal income tax rate, the tax rate other US corps pay.
But by slashing Whirlpool’s federal income tax rate from 35% to 20%, the $2.4 bil plus of foreign earnings can now be repatriated to the US and taxed at a 15% lower tax rate, and thus the windfall tax savings to Whirlpool would be substantial.
Dr. Bucshon’s tax plan is like pouring salt on the wounds of Whirlpool’s laid off workers. They get shafted from losing their jobs, and Whirlpool now gets rewarded further for shafting them. And the windfall tax reward accruing to Whirlpool here under Dr. Bucshon's tax proposal, is not just related to the 1,100 recently laid off employees, but to all Whirlpool employees who have ever been laid off in the past 50 years, since the Unremitted Foreign Earnings of $2.4 bil relates to cumulative foreign earnings since Whirlpool started operations overseas many years ago.
There are many US Senate and US House Republican candidates who are running on the same large US Multinational Corp income tax slashing plans espoused by Dr. Bucshon above. Just to name a few....US Senate candidates Dan Coats in Indiana, Pat Toomey in Pennsylvania, Rob Portman in Ohio, and Linda McMahon in Connecticut. Thus, there would be similar massive windfall tax benefits to large US Multinational Corps from their tax proposals here, but it's a pyrrhic victory for these Big Corps because it's on the backs of laid off workers, whose US jobs were shipped overseas. And it's also on the back of the entire US, which will experience a dramatic increase in the US Deficit from this Big Multinational Corp federal income tax rate slashing plan.
