RED ALERT: Major Manufacturer Hit by Economy Now Hit Again by Obamacare Taxes

New Taxes Will Hinder Caterpillar’s Recovery

Soon after being sworn-in, President Obama said America’s economic success could be measured by Caterpillar’s success:

“So what’s happening at this company tells us a larger story about what’s happening with our nation’s economy, because, in many ways, you can measure America’s bottom line by looking at Caterpillar’s bottom line.”

(President Obama, “Remarks to Caterpillar Employees,” 2/12/09)

Now the Democrats’ government takeover of healthcare will hinder Caterpillar’s recovery. What does that mean for America’s economic recovery?:

“Caterpillar Inc. said Wednesday it will take a $100 million charge to earnings this quarter to reflect additional taxes stemming from newly enacted U.S. health-care legislation.

“The world’s largest construction equipment manufacturer by sales, warned last week that provisions in the legislation would subject the company to federal income taxes on the subsidies it receives for providing prescription drug benefits for its retirees and their spouses.

“Since the Medicare Part D program was enacted in 2003, Peoria, Ill.-based Caterpillar and more than 3,500 companies that already provided drug-benefit expenses to retirees have received tax-free subsidies as an incentive to maintain their drug programs.

“The subsidies average $665 per person covered under a company-sponsored prescription program, according to benefits consultants Towers Watson.

“About 40,000 Caterpillar retirees receive company-sponsored drug benefits, which are more generous than Medicare’s drug plan, which requires recipients to pay some out-of-pocket expenses.

“The charge is expected to be a one-time cost, but Caterpillar has argued that higher taxes and other potential cost increases related to insurance coverage mandates in the legislation will hinder the company’s recovery this year after a 75% plunge in income during 2009.

“‘From our point of view, a tax increase like this cannot come at a worse time,’ said Jim Dugan, a Caterpillar spokesman.”

(Bob Tita, “Caterpillar Takes Hit on Health Care,” The Wall Street Journal, 3/25/10)

By Code Red