Extending the tax credit for energy-efficient appliances through 2012 would cost the government $235 million, according to the first updated congressional estimate since officials acknowledged that they did not realize how much companies including Whirlpool Corp. (WHR) and General Electric Co. (GE) were benefiting from the tax incentive.
That estimate, released yesterday by the Joint Committee on Taxation, is more than three times the $78 million projected cost of the one-year extension through 2011 that Congress passed in December. It’s more than nine times the Treasury Department’s $25 million estimate for extending the credit through 2012.
Bloomberg News reported Feb. 22 that Whirlpool estimated it would receive $300 million from the credit this year, and that GE received more than $200 million in 2010 and will continue to get credits this year.
“This is the kind of thing that shocks people, and it wakes them up to the cost of these seemingly well-intentioned incentive programs,” said Scott Hodge, president of the Tax Foundation, a Washington group that favors a simpler tax code. “In Washington, $200 million doesn’t sound like much. Sometimes it’s even the smallest programs that shock people, just because of their outrageousness.”
The credit will generate about one-third of Whirlpool’s earnings this year. As of Dec. 31, 2010, the company had $555 million in stockpiled business credits and $2 billion in tax losses. Losses and credits can typically be used to offset future income or taxes for up to 20 years.
Hodge said he thought the new estimate would help draw lawmakers’ attention to the credit, which expires Dec. 31.
The figure was included in JCT’s estimate of the 2012 budget that President Barack Obama proposed Feb. 14. Obama supports a one-year extension of the appliance credit.
The credit, enacted in 2005, provides fixed-dollar amounts to companies that increase production of high-efficiency dishwashers, clothes washers and refrigerators that meet standards set out in the tax code.
The law caps the credits any company can receive for 2011 at $25 million for most appliances. Companies that manufacture the clothes washers and refrigerators that meet the highest efficiency standards are eligible for uncapped credits of $225 and $200 per appliance, respectively.
Thomas Barthold, chief of staff of the Joint Committee on Taxation, said in February that the cap was a factor in last year’s $78 million estimate. He did not respond to an e-mailed request for comment today.
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