Caterpillar and other companies took billions of dollars in charges against earnings when Obamacare was enacted. One section of the Obamacare bill eliminated a tax break available to companies that provide drug benefits to retirees as part of their insurance coverage. The government’s own accounting for the tax change anticipated that it would generate $4.5 billion of revenue over the next 10 years.
Yet when Caterpillar and the other companies took the charges against earnings, the White House suggested that companies were exaggerating the effects of the tax change. Obama administration Secretary of Commerce Gary Locke dutifully peddled the administration line, asserting that the companies were being “premature and irresponsible” in taking the chargeoffs.
Reps. Henry Waxman and Bart Stupak opened an investigation and demanded that four companies — AT&T, Caterpillar, Deere and Verizon — supply documents analyzing the “impact of health care reform,” together with an explanation of their accounting methods. The Democrats apparently thought that they could eliminate a corporate tax deduction for the purpose of raising government revenue without affecting corporate earnings. That’s why deep thinkers like Waxman and Stupak are paid the big bucks by taxpayers. .
Waxman and Stupak even planned to produce a bit of political theater, scheduling a hearing on the chargeoffs at which the companies’ executives were to testify. The production was canceled when Waxman was apprised of the obvious consequences of the bill he and his Democratic buddies had just voted for.
I wonder which poor staffer drew the short straw requiring him to advise Waxman that the elimination of a big corporate tax deduction results in a big corporate tax expense that has to be recognized under applicable accounting standards. It can’t have been pleasant duty.
Robert Pear reports the results of the congressional investigation in today’s New York Times. After investigating, “House Democrats have concluded that the companies were right to tell investors and the government about the expected adverse effects of the law on their financial results” Pear explains:
In a memorandum summarizing its investigation, the Democratic staff of the committee said, “The companies acted properly and in accordance with accounting standards in submitting filings to the S.E.C. in March and April.”
Moreover, it said, “these one-time charges were required by applicable accounting rules.” The committee staff said this view was confirmed by independent experts at the Financial Accounting Standards Board and the American Academy of Actuaries.
For readers with a short memory, Pear even recalls: “Mr. Waxman, the chairman of the committee, and Mr. Stupak canceled a hearing at which they had planned to question executives on the effects of the law.”
These folks are without shame and beneath contempt.