A 25% Federal Corporate Income Tax Rate Still Leaves the United States Uncompetitive
After originally proposing a corporate tax rate hike to 28 percent, Biden announced today that he would be willing to implement a 25 percent rate instead.
“I’m open to compromising, yes. It doesn’t have to be exactly what I say,” Biden said at the White House when asked if he would accept raising the corporate tax rate to 25% instead of the 28% he has proposed.
WATCH:
A 25 percent federal corporate rate would still leave the U.S. uncompetitive compared to the rest of the world.
The U.S. federal corporate tax rate is 21 percent. However, states also levy their own corporate tax rates, averaging an additional 6 percent. Because this state tax is deductible when paying the federal corporate rate, the combined national and subnational rate averages out to 25.77 percent.
A 25 percent federal rate would therefore result in a combined federal and state rate of 29.5 percent, higher than Communist China and higher than the average OECD rate.
OECD average national + subnational rate: 23.51%
China’s rate: 25%
U.S. national + subnational rate IF Democrats raise federal rate to 25 percent: 29.5%
Workers, consumers, and shareholders will bear the burden of an increased corporate tax rate. Such a hike will cause businesses to invest less in the United States and more overseas, resulting in fewer job opportunities and lower wages for American workers:
- A Treasury Department study estimated that “a country with a 1 percentage point lower tax rate than its competitors attracts 3 percent more capital.” This is because raising the corporate rate makes the United States a less attractive place to invest profits.
- According to the Stephen Entin of the Tax Foundation, labor (or workers) bear an estimated 70 percent of the corporate income tax in the form of wages and employment. As Entin notes, 50 percent, 70 percent, or even 100 percent of the corporate tax is borne by workers.
- A 2012 Harvard Business Review piece by Mihir A. Desai notes that raising the corporate tax lands “straight on the back” of the American worker and will see a decline in real wages.
- A 2012 paper at the University of Warwick and University of Oxford found that a $1 increase in the corporate tax reduces wages by 92 cents in the long term. This study was conducted by Wiji Arulampalam, Michael P. Devereux, and Giorgia Maffini and studied over 55,000 businesses located in nine European countries over the period 1996-2003.
- Even the left-of-center Tax Policy Center estimates that 20 percent of the burden of the corporate income tax is borne by labor.
Raising the corporate rate to 25 percent, as some Democrats are calling for, would leave America with a rate higher than many foreign competitors and harm American workers, businesses, and investment.
Photo Credit: Matt Johnson
70+ Groups, Activists to Congress: Oppose the PRO Act
ATR has released a letter to Congress from over 70 groups and activists opposed to the "Protecting the Right to Organize" (PRO) Act.
If implemented, the PRO Act would drastically increase the Big Labor's power at the expense of the American worker.
You can read the letter here or below:
May 5, 2021
Dear Member of Congress,
We are writing in opposition to the Protecting the Right to Organize (PRO) Act. The PRO Act, introduced by Rep. Bobby Scott (D-Va.), passed the House on March 9, 2021 and is pending Senate consideration.
We oppose the PRO Act because the legislation would harm workers and taxpayers by codifying many of the Obama-era rules and decisions that led to higher unemployment and a stagnant economy. Representatives who vote for this bill are simply helping labor union bosses, their campaign contributors, at the expense of American workers.
For example, one of the Act’s harmful provisions would codify the National Labor Relations Board’s 2015 Browning-Ferris Industries decision. That decision expanded the definition of joint employer and increased liability for many businesses, especially franchises. In fact, the International Franchise Association has found that the expanded joint employer rule costs the franchise sector as much as $33.3 billion annually and has led to 376,000 lost job opportunities. Codifying this NLRB decision would effectively eliminate this business model, putting many employees and small businesses out of work. However, big labor would benefit from this provision because they could unionize these employees more easily.
This bill would also force all private sector workers to pay fees to labor unions, whether they wanted to support them or not. This would effectively invalidate all state Right-to-Work laws and would deny First Amendment rights to these workers. This provision hurts workers because right-to-work laws have benefited workers. From 2008 – 2018, for example, the percentage growth in the number of people employed in right-to-work states was 10.8%, while the percentage for those in forced-unionism states was much lower at 5%. Invalidating these laws would, therefore, hurt workers and employers, but would provide more dues to unions.
Another business model that is severely threatened by this legislation is the gig economy. The PRO Act would codify California’s “ABC” test to determine who is an independent contractor and who is an employee. This test makes it harder for employers to hire independent contractors, but makes it easier for unions to unionize workers. According to the Federal Reserve, about 3 in 10 Americans work in the gig economy, and these workers would be at risk for losing their jobs.
Because the legislation harms workers in order to help labor union bosses, we strongly urge Members of Congress to vote against the PRO Act.
Sincerely,
Grover G. Norquist
President, Americans for Tax Reform
James L. Martin
Founder/Chairman, 60 Plus Association
Saulius "Saul" Anuzis
President, 60 Plus Association
Marty Connors
Alabama Center/Right Coalition
Bethany Marcum
CEO, Alaska Policy Forum
Phil Kerpen
President, American Commitment
Lisa B. Nelson
CEO, ALEC Action
Tom Giovanetti
President, Americans for a Strong Economy
Rick Manning
President, Americans for Limited Government
Scot Mussi
President, Arizona Free Enterprise Club
John Palatiello
President, Business Coalition for Fair Competition
Garrett Ballengee
Executive Director, Cardinal Institute for WV Policy
Andrew F. Quinlan
President, Center for Freedom and Prosperity
Russell Brown
President, Center for Independent Employees CEO, RWP Labor, LLC
Timothy Lee
Senior Vice President of Legal and Public Affairs, Center for Individual Freedom
Catrin Wigfall
Policy Fellow, Center of the American Experiment (Minnesota)
Chuck Muth
President, Citizen Outreach
Bob Luebke
Director of Policy, Civitas Institute (North Carolina)
David McIntosh
President, Club for Growth
Russell Hollrah
Executive Director, Coalition to Promote Independent Entrepreneurs
Nathan Benefield
Vice President & COO, Commonwealth Foundation (Pennsylvania)
Trey Kovacs
Policy Analyst, Competitive Enterprise Institute
Matthew Kandrach
President, Consumer Action for a Strong Economy (CASE)
Tom Schatz
President, Council for Citizens Against Government Waste
Katie McAuliffe
Executive Director, Digital Liberty
Grant Callen
President, Empower Mississippi
Brian Minnich
Executive Vice President, Freedom Foundation (California, Oregon, Washington)
Adam Brandon
President, FreedomWorks
Suzi Voyles
Georgia President for Eagle Forum
Victor Riches
President and CEO, Goldwater Institute (Arizona)
J. Scott Moody
CEO, Granite Institute (New Hampshire)
James Taylor
President, The Heartland Institute
Peter J. Ferrara
Senior Fellow, Heartland Institute
Tim Chapman
Executive Director, Heritage Action for America
Mario H. Lopez
President, Hispanic Leadership Fund
Fred Birnbaum
Vice President, Idaho Freedom Foundation and Idaho Freedom Action
Heather R. Higgins
CEO, Independent Women's Voice
Jon Caldara
President
F. Vincent Vernuccio, J.D.
President, Institute for the American Worker
Chris Ingstad
President, Iowans for Tax Relief
Sal J. Nuzzo
Vice President of Policy, The James Madison Institute (Florida)
Brett Healy
President, The John K. MacIver Institute for Public Policy (Wisconsin)
Becki Gray
Senior Vice President, John Locke Foundation (North Carolina)
Dave Trabert
President, Kansas Policy Institute
Connor Boyack
President, Libertas Institute (Utah)
Michael J. Reitz
Executive Vice President, Mackinac Center for Public Policy (Michigan)
Matthew Gagnon
CEO, Maine Heritage Policy Center
Carl Copeland
Executive Director, Massachusetts Fiscal Alliance
Tim Jones
Chair, Missouri Center-Right Coalition
Fmr. Speaker, Missouri House
Jameson Taylor, Ph.D.
Vice President for Policy, Mississippi Center for Public Policy
Pete Sepp
President, National Taxpayers Union
Bill O'Brien
Co-chair of the New Hampshire Center Right Coalition
Robert Fellner
Policy Director, Nevada Policy Research Institute
Douglas Kellogg
Executive Director, Ohioans for Tax Reform
Tom Hebert
Executive Director, Open Competition Center
Daniel J Erspamer
CEO, The Pelican Institute for Public Policy (Louisiana)
Lorenzo Montanari
Executive Director, Property Rights Alliance
David Y. Denholm
President, Public Service Research Council
Eli Lehrer
President, R Street Institute
Mike Stenhouse
CEO, Rhode Island Center for Freedom and Prosperity
Paul J. Gessing
President, Rio Grande Foundation (New Mexico)
Bette Grande
CEO, Roughrider Policy Center ND
Karen Kerrigan
President & CEO, Small Business & Entrepreneurship Council
Maureen Blum
Founder and Principal, Strategic Coalitions & Initiatives, LLC
Jeff Kropf
Representative (Ret) Oregon House of Representatives, Oregon Taxpayer Coalition
David Williams
President, Taxpayers Protection Alliance
Lynn Taylor
President, Tertium Quids (Virginia)
Christian N. Braunlich
President, Thomas Jefferson Institute for Public Policy (Virginia)
Carl Bearden
CEO, United for Missouri
Rick Esenberg
President and General Counsel, Wisconsin Institute for Law and Liberty
Worker Rights Alliance (Washington)
Heather Greenaway
Executive Director, Workforce Fairness Institute
Carol Platt Liebau
President, Yankee Institute for Public Policy (Connecticut)
Photo Credit: Jason Chan
Biden Breaks Small Business Tax Pledge
During his campaign, President Joe Biden promised the American people that he would not raise taxes on small businesses. Now safely in office, he is violating that promise. His tax plan imposes direct tax increases on small businesses.
The promise was made on Feb. 20, 2020 before a national audience during a Democratic debate hosted by MSNBC:
MSNBC's Hallie Jackson: "I want to ask you about Latinos owning one out of every four new small businesses in the United States. Many of them have benefited from President Trump's tax cuts, and they may be hesitant about new taxes or regulations. Will taxes on their small businesses go up under your administration?"
Biden: "No. Taxes on small businesses won't go up."
Click here or below to see Biden's broken pledge
But Biden is pushing a series of tax increases that raise small business taxes:
1. Biden's increase in the top marginal income tax rate to 39.6 percent will hit small business sole proprietorships, LLCs, partnerships and S-corporations.
Small businesses organized as pass-through firms don’t pay taxes themselves. Instead, the profits of the business “pass through” to the owners who pay individual taxes on their 1040 form. Biden wants to raise the top marginal income tax rate to 39.6 percent which will hit many small businesses.
From the Tax Policy Center:
"In 2017, individuals reported about $1.03 trillion in net income from all types of pass-throughs accounting for 9.3 percent of total AGI reported on individual income tax returns."
According to the Congressional Research Service, "The majority of both corporations and pass-throughs in 2011 had fewer than five employees (55% of C corporations and 64% of pass-throughs). Nearly 99% of both corporations and pass-throughs had fewer than 500 employees, the most common employment-based threshold used by the Small Business Administration (SBA)."
As noted in a Senate Finance Committee report, "in 2016, only 42 percent of net business income in the United States was earned by corporations, down from 78.3 percent in 1980."
2. Biden’s corporate income tax rate hike from 21 percent to 28 percent targets one million small businesses across the country organized as corporations.
As noted by the Small Business Administration Office of Advocacy, there are 31.7 million small businesses in the U.S. Of those, 25.7 million have no employees, while 6 million have employees. Of these 6 million small employers, 16.8 percent, or 1 million of these businesses are classified as c-corporations. The SBA classifies a small employer as any independent business with fewer than 500 employees.
Biden claims his spending plan makes large corporations pay their “fair share.” However, the plan will raise taxes on many small businesses that are structured as corporations.
3. Biden's elimination of stepped up basis: A second death tax on small business.
Biden is targeting small businesses with a second Death Tax: Biden will eliminate step-up in basis. This is a devastating tax increase on small businesses. In this video, you can see a sample of the many times Biden has threatened to eliminate step-up in basis.
Elimination of stepped up basis would impose an automatic capital gains tax at death -- separate from, and in addition to -- the Death Tax.
In a Forbes piece titled "This Biden Tax Hike Hike Will Hit Mom & Pop Hard" tax lawyer Robert W. Wood writes:
Under current tax law, assets that pass directly to your heirs get a step-up in basis for income tax purposes. It doesn’t matter if you pay estate tax when you die or not. For generations, assets held at death get a stepped-up basis—to market value—when you die. Small businesses count on this.
Wood notes:
Biden's proposal would tax an asset's unrealized appreciation at transfer. You mean Junior gets taxed whether or not he sells the business? Essentially, yes. The idea that you could build up your small business and escape death tax and income tax to pass it to your kids is on the chopping block. Biden would levy a tax on unrealized appreciation of assets passed on at death. By taxing the unrealized gain at death, heirs would get hit at the transfer, regardless of whether they sell the asset.
As reported previously by CNBC:
“When someone dies and the asset transfers to an heir, that transfer itself will be a taxable event, and the estate is required to pay taxes on the gains as if they sold the asset,” said Howard Gleckman, senior fellow in the Urban-Brookings Tax Policy Center.
As reported by Richard Rubin of the Wall Street Journal:
Manufacturers and farmers, who tend to be more asset-rich and cash-poor, are watching closely for those details, concerned they might have to sell illiquid businesses to pay the taxes.
Courtney Silver, president of Ketchie Inc., a family-owned, 25-employee machine shop in Concord, N.C. that started in 1947, said she was concerned about the potential impact.
“I really can’t imagine being hit with that decision of that potential tax implication,” said Ms. Silver, 40 years old, who took over the business when her husband, Bobby Ketchie, died in 2014. “That to me is really hard to wrap my head around.”
It could be challenging for asset owners to figure out their tax basis, which is what they paid for the property and invested in it. That complexity is part of what doomed a similar proposal in the late 1970s, which Congress passed, then delayed, then repealed.
As noted in an Ernst and Young study, if a small business is unable to provide sufficient evidence to prove the cost basis of an asset, then it may set to $0. In other words, tax would be applied to the entire value of taxpayer assets:
“Family-owned businesses may also find it difficult to comply because of problems in determining the decedent’s basis and in valuing the bequeathed assets. It seems likely that these administrative problems could lead to costly disputes between taxpayers and the IRS. Additionally, if sufficient evidence is not available to prove basis, then $0 may be used for tax purposes. This may result in an inappropriately large tax at death.”
To honor his small business tax pledge to the American people, Biden must forego the above tax increases.
Photo Credit: U.S. Secretary of Defense
Massachusetts’ Flavor Ban Fiasco is Costing the State Millions in Tax Revenue
On June 1, 2020, a law signed by Massachusetts Governor Charlie Baker went into effect, prohibiting all flavored tobacco products from being sold in Massachusetts. Since then, cigarette sales in the commonwealth have plummeted as Massachusetts retailers sold 17.7 million fewer cigarette tax stamps between June and November of 2020 than they did in that same time period the previous year.
While a quick glance at this policy makes it appear successful, Massachusetts’ flavor ban has been a monumental disaster for the state. Neighboring states have more than made up for the decrease in sales in Massachusetts, clear evidence that the flavor ban has done nothing to decrease smoking rates. Rather, Massachusetts has lost tens of millions of dollars in tax revenue while surrounding states like New Hampshire and Rhode Island have seen massive spikes in revenue as a result of Massachusetts’ failed policy.
A report from the New England Convenience Store & Energy Marketers Association provides concrete data on the topic. Here are some of their findings.
Key Findings:
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Between June 1, 2020, and September 30, 2020, New England states (Massachusetts, Maine, New Hampshire, Vermont, Rhode Island and Connecticut) have sold over 230 million tax stamps for cigarettes. In that same period in 2019, the same states sold 225 million tax stamps. This increase in cigarette tax stamp sales shows that even with Massachusetts’ tobacco flavor ban, cigarette sales have increased in a year where they were expected to decrease by 2% nationally.
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Excise tax revenues on cigarettes in Massachusetts are down significantly with estimates showing that “excise tax losses for Massachusetts are over 10 million dollars a month”.
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As Massachusetts revenues decrease, New Hampshire’s cigarette excise tax revenues have increased $28 million in 2020 compared to the same period the previous year.
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New Hampshire isn’t the only beneficiary of Massachusetts’ flavor ban. Rhode Island’s cigarette excise tax revenue increased by over $12 million in 2020 compared to the same period the previous year with an additional $2 million in sales tax revenue.
This data clearly illustrates that instituting a flavor ban on tobacco has been a complete and utter disaster for Massachusetts. 89% of legal cigarette sales occur in convenience stores and over 54,000 Massachusetts residents are convenience store employees. The total economic cost of this policy has been massive.
Not only has the flavor ban harmed businesses, but it will also have unintended consequences on children as well. Massachusetts’ excise tax revenue from cigarettes funds tobacco prevention programs. With tax revenue losses over $10 million a month, there will be considerably less resources available to teach school children in the Bay State the dangers of combustible cigarettes. The flavor ban was aimed at decreasing youth use of tobacco products. Unfortunately, it may very well have a paradoxical effect and lead to an increase in youth smoking.
Politicians in at least thirteen states are considering flavor bans, many identical to Massachusetts’. In the interests of public health, protecting state tax revenue, and defending small businesses, these lawmakers must drop these senseless initiatives.
Photo Credit: Kyle Klein Photography
More from Americans for Tax Reform
Biden’s Proposed Capital Gains Tax is More than Double China, OECD Average
President Biden has proposed doubling the capital gains tax rate as part of his $4 trillion spending plan. Under Biden, the top capital gains rate will be 48.8 percent after state taxes. This is more double China’s 20 percent capital gains tax rate.
The U.S. currently has a combined capital gains rate of over 29 percent inclusive of the 3.8 percent Obamacare tax and the 5.4 percent state average capital gains rate. Under Biden, this rate would approach 50 percent. This would give the U.S. a capital gains tax that is significantly higher than foreign competitors:
OECD Simple Average: 18.4%
OECD Weighted Average: 23.2%
China's Capital Gains Rate: 20%
United States Now: 29.2% (20% + 3.8% Obamacare tax + 5.4% state average)
United States Under Joe Biden: 48.8% (39.6% + 3.8% Obamacare tax + 5.4% state average)
Under Biden’s plan, taxpayers in California will pay a top capital gains tax rate of 56.7 percent (39.6% + 3.8% + 13.3% California state rate = 56.7%). New Yorkers will pay a top capital gains rate of 52.2%, while New Jersey taxpayers will pay a top capital gains tax rate of 54.14%.
Not only will Biden’s capital gains tax hike make us uncompetitive, it will also harm the economy, threaten the life savings of Americans, and could even reduce short term revenues.
Capital gains taxes act as a barrier to job creation, wage growth, and economic growth. This tax imposes double taxation on corporate income – first, businesses pay the corporate income tax on their earnings. Second, the investor pays the capital gains tax on dividends received or stocks when they are sold. This double taxation discourages savings, suppresses productivity, and discourages investment. Ultimately, this tax hike will threaten business creation, business expansion, entrepreneurship, and jobs and wages.
Biden’s capital gains tax hike could also reduce retirement savings. As part of his tax hike, Biden would double the tax rate on carried interest capital gains. This will harm private equity investors including the 165 public pension funds representing 20 million public sector workers.
Biden’s tax hikes could even reduce federal revenues in the short term. Because the tax only applies when a taxpayer sells the asset, a high capital gains rate discourages individuals from selling in order to delay having to pay the tax. Historically, when the capital gains tax was cut, revenue increased. When the capital gains tax is low, investment increases, stock prices increase, and revenue goes up. The inverse is of course true.
Democrats used to oppose a high capital gains tax. As recently as 2012, Senator Chuck Schumer (D-NY) rejected doubling the capital gains tax rate to 39.6 percent. As Schumer noted:
“Now, if you are returning the top income rate to Clinton-era levels, as I have proposed, I do think it is too much to treat capital gains the same as ordinary income,” Mr. Schumer said. “We don’t need a 39.6% rate on capital gains.”
Photo Credit: Gage Skidmore
Biden Wants the IRS to Snoop on Your Venmo Account
In yet another move to increase the federal government's presence in your life, the Biden administration wants to sic the IRS on your Venmo account.
Biden has proposed $80 billion in funding for additional IRS enforcement. As part of this proposal, banks and third-party payment providers, like Venmo and CashApp would be required to report account holders’ aggregate account outflows and inflows.
"The proposal would require banks to report annual account inflows and outflows to the Internal Revenue Service. The requirement would also extend to peer-to-peer payment services such as Venmo," notes the Wall Street Journal.
President Biden claims that this proposal is designed to “crack down on millionaires and billionaires who cheat on their taxes.” However, it is unclear how monitoring Venmo accounts – many of which are held by younger Americans – contributes to this goal.
The average Venmo transfer amount is $60 and is popular among young people, with over 7 million Venmo users belong in the 18-34 age group. For users who have undergone identity verification, the weekly spending limit is $7,000. These trends exist for most third-party payment providers.
It is hard to see how millionaires and billionaires are using Venmo or CashApp to launder mass amounts of money.
This is just another effort to expand the power of the IRS. Rest assured, the IRS will use these powers against Americans of all income levels.
At a time when Americans are already struggling, these new reporting rules would create unnecessary burdens. As noted in this excerpt from Forbes:
It may create problems, however, that should be considered and addressed as this plan works its way through Congress. For example, consider a young couple saving up to buy a home. All savings are put into the “dream home” savings account. Then, when it comes time to make the down payment, the $50,000 dream home savings goes into the regular checking account, which is then wired to the seller’s escrow account. Buying a home is not a taxable event (at least for federal income tax), selling one is. Will the IRS receive information from the financial institutions that leads to an audit?
Paul Merski, vice president of congressional relations at Independent Community Bankers of America, voiced his criticism of the proposal:
Banks already report millions of transactions a day to the Financial Crimes Enforcement Network in the form of currency transaction reports, in addition to suspicious activity reports, which are required when potential illicit activity is detected by a bank. Banks are required to submit currency transaction reports when a deposit or withdrawal is $10,000 or more, a threshold that’s already very low, Merski said.
Merski said the proposal, as written, is akin to “sending your bank statement to the IRS every month,” which would be opposed by the banking industry because of the reporting burdens already required by federal regulators.
“The federal government can’t track all of that—any more requirements would be adding more hay to that haystack,” he said.
As also noted by the Wall Street Journal, the bank account snooping will give the IRS an "enormous" quantity of new data:
It would also create an enormous flow of information that the IRS would have to learn how to manage and use.
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Congress will have to weigh the potential burdens and privacy concerns against the revenue gains as it considers the plan.
Observers are rightly skeptical that this plan will be able to generate anywhere near the $780 billion promised by the Biden administration. As noted in this excerpt from Yahoo News:
Previous government estimates put the benefits of increased IRS funding much lower. Last year, the Congressional Budget Office estimated that an additional $40 billion of funding over 10 years would increase government revenues by $103 billion.
Even Obama-era IRS chief John Koskinen questioned the Biden $80 billion funding request. "I'm not sure you'd be able to efficiently use that much money," he said.
Congress should refrain from passing a proposal that would give the federal government unprecedented access to your private information.
Photo Credit: jlhervas
Minnesotans Will Get Stuck with Higher Utility Bills Due to Biden Corporate Tax Rate Hike
If Klobuchar and Smith vote for Biden's corporate income tax rate increase, they will have to explain why they just increased your utility bills
If President Biden and Sens. Amy Klobuchar and Tina Smith raise the corporate tax rate, Minnesota households and businesses will get stuck with higher utility bills. Democrats plan to impose a corporate income tax rate increase to 28%, even higher than communist China's 25%.
Customers bear the cost of corporate income taxes imposed on utility companies. Corporate income tax cuts drive utility rates down, corporate income tax hikes drive utility rates up.
Electric, gas, and water companies must get their billing rates approved by the respective state utility commissions. When the 2017 Tax Cuts and Jobs Act cut the corporate income tax rate from 35% to 21%, utility companies worked with officials to pass along the tax savings to customers, including at least four Minnesota utilities.
As noted in an August 9, 2018 Minnesota Public Utilities Commission Statement:
The Minnesota Public Utilities Commission (Commission) ordered Minnesota’s investor-owned utilities to return approximately $200 million in annual benefits reflecting lower corporate tax rates resulting from the federal 2017 Tax Cut and Jobs Act.
This $200 million in annual benefits includes the decisions made today in this current proceeding relating to accounting and taxes; the recent decisions made for CenterPoint Energy (approximately $21.3 million) and Minnesota Power (approximately $18.7 million) in their general rate cases; and a pending decision regarding Minnesota Energy Resources Corporation (currently estimated to be approximately $5.2 million) in its general rate case, which is scheduled to be taken up by the Commission in November of this year.
With respect to each regulated utility, the Commission acted to ensure that each utility’s rates reflect the new, lower federal income tax rates in the cost of providing service.
Xcel Energy passed along their savings to customers as well:
Xcel Energy’s $136 million windfall from last year’s federal tax act will be passed directly to its Minnesota customers through refunds, state utility regulators ruled Thursday.
Customers of Minnesota’s other investor-owned utilities will also receive refunds — or smaller rate increases — due to the 2017 tax law, which slashed the U.S. corporate income tax rate from 35 percent to 21 percent.
Xcel’s average residential electricity customer — someone who pays $85 to $90 per month — will get a refund of about $45 as a one-time bill credit. The company’s average residential gas customer — who pays around $48 a month — will get a one-time bill credit of about $8. Xcel said it expects the refunds will be made by year’s end. – August 11, 2018 Star Tribune article
Conversely, a vote for a corporate income tax rate hike is a vote for higher utility bills right as the USA is trying to recover from the pandemic.
Sens. Klobuchar and Smith would be wise to stay away from tax increases.
Virginians Will Get Stuck with Higher Utility Bills Due to Biden Corporate Tax Rate Hike
If Kaine and Warner vote for a corporate income tax rate increase, they will have to explain why they just increased your utility bills
If President Biden and Sens. Tim Kaine and Mark Warner hike the corporate income tax rate, Virginia households and businesses will get stuck with higher utility bills. Democrats plan to impose a corporate income tax rate increase to 28%, even higher than communist China's 25%.
Customers bear the cost of corporate income taxes imposed on utility companies. Corporate income tax cuts drive utility rates down, corporate income tax hikes drive utility rates up.
Electric, gas, and water companies must get their billing rates approved by the respective state utility commissions. When the 2017 Tax Cuts and Jobs Act cut the corporate income tax rate from 35% to 21%, utility companies worked with officials to pass along the tax savings to customers, including at least twelve Virginia utilities.
Working with the Virginia State Corporation Commission, Appalachian Natural Gas, Aqua Virginia Inc., Columbia Gas of Virginia, Roanoke Gas, Virginia American Water Company, Virginia Electric and Power Company, Virginia Natural Gas, Appalachian Power, Washington Gas Light, Southwestern Virginia Gas, Atmos Energy and Dominion Energy Virginia passed along tax savings to customers.
As noted in this January 8, 2018 SCC News Release:
The legislation cuts the federal corporate income tax rate from 35% to 21% effective January 1, 2018. This tax cut, in turn, reduces the cost of service for many of Virginia’s major electric, gas and water utilities. Utility rates paid by customers are based on the cost of service.
To preserve the savings from this tax cut for customers, the Commission ordered all applicable Virginia utilities to account for the tax savings by accruing a regulatory liability on the utility’s books. The tax savings will thus be quantified and available to be passed on to customers in subsequent rate proceedings.
The utilities subject to the Commission’s order serve millions of Virginia residential and business customers. They include Virginia-American Water Company; Aqua Virginia, Inc.; Washington Gas Light; Columbia Gas of Virginia; Virginia Natural Gas; Roanoke Gas; Atmos Energy; Southwestern Virginia Gas; Appalachian Natural Gas Distribution; Kentucky Utilities; Appalachian Power Company; and Virginia Electric and Power Company.
As noted in this January 8, 2018 Washington Gas Light press release:
Washington Gas, a WGL Holdings, Inc. company (NYSE: WGL), announced plans today to file with state regulatory commissions in all three of its service territories, including the District of Columbia, Maryland, and Virginia, to pass through annual tax savings to the more than 1.1 million customers that the company serves across the region.
If the recommendations are approved, Washington Gas has committed to providing a reduction in customer rates that would lower annual customer bills by approximately $34 million, beginning in the first quarter of 2018.
The federal tax savings are driven by the Tax Cuts and Jobs Act of 2017, a new law passed on December 22, 2017, that went into effect on January 1, 2018. Reducing the corporate income tax rate from 35 percent to 21 percent lowers the amount that Washington Gas will have to pay in federal income tax.
As noted in this March 8, 2019 SCC statement:
The State Corporation Commission (SCC) has ordered a reduction in the rates of Dominion Energy Virginia and Appalachian Power Company on April 1. The reduction and forthcoming rate credits continues a directive of the Commission issued in January 2018 that ensures customers receive the benefits of the corporate tax cut contained in federal tax legislation passed by Congress in December 2017.
The federal corporate income tax rate was reduced from 35% to 21% effective January 1, 2018. A week later, on January 8, the SCC ordered the companies to preserve the savings from this tax cut for the benefit of their customers.
As noted in this WSLS 10 News Article:
The State Corporation Commission wants you to receive some of the benefits of the recent federal corporate tax cut.
The law cuts the federal corporate income tax rate from 35 percent to 21 percent.
As a result, the service cost for many of Virginia's major electric, gas and water utilities will be reduced. Those utilities include AEP, Roanoke Gas and Southwestern Virginia Gas.
Conversely, a vote for a corporate income tax rate hike is a vote for higher utility bills right as the USA is trying to recover from the pandemic.
Sens. Kaine and Warner would be wise to stay away from tax increases.
36 Organizations Sign Coalition Letter Condemning Menthol Prohibition Proposal
Earlier today, Americans for Tax Reform released a letter signed by 36 leading national and state-based organizations representing millions of taxpayers and consumers throughout the United States urging the Food and Drug Administration to reject a proposed ban on menthol cigarettes. This letter adds to a similar letter signed by 27 civil liberty and racial justice organizations organized by the American Civil Liberties Union (ACLU), and demonstrates overwhelming bipartisan opposition to this proposal.
The letter noted the devastating social impact of criminalizing an activity undertaken by over 18 million Americans, primarily from minority communities, asserting “If this proposal were to be enacted, it is inevitable that it would lead to further confrontations between individuals and law enforcement and break down trust even further. In addition, by diverting law enforcement resources to preventing the sale of menthol cigarettes, this policy will reduce the resources available for the prevention and solving of property and violent crimes.”
The letter continued, “We further draw your attention to the fact that any comprehensive analysis of the data from jurisdictions where menthol products have been banned demonstrates that, while the majority of users switch to non-menthol cigarettes, over 20% of menthol smokers moved to purchasing illicit products through the black market. Not only does this put all parties involved at risk of police involvement, the illicit tobacco market is increasingly been run by sophisticated international criminal syndicates, often with links to sex trafficking, money laundering and even, increasingly, terrorism.”
For these reasons, as the letter noted, the U.S. State Department has explicitly called tobacco smuggling, “a threat to national security”.
The letter also recognized the importance of promoting harm reduction over prohibition, writing, “If the FDA wishes to reduce smoking rates, the best way of doing this is not through bans, but rather embracing life-saving new technologies to help smokers quit. The science is now overwhelming that the most effective way for smokers to quit is through the use of non-combustible reduced risk tobacco alternatives, ranging from vapor and “heat not burn” devices, to oral nicotine delivery systems or moist loose tobacco (which the FDA already allows to be marketed as reducing the cancer risk for persons who make the switch).”
The letter concluded by urging the FDA to “engage in evidence-based policy making and embrace new technologies and alternative nicotine delivery systems that have been proven will be able to save millions of American lives.”
The full letter can be read below.
Americans for Tax Reform Coalition Letter FDA Menthol Prohibition by Karl Abramson on Scribd
Photo Credit: Houston Forward Times
More from Americans for Tax Reform
Massachusetts Residents Will Get Stuck with Higher Utility Bills Due to Biden Corporate Tax Rate Hike
If Biden and the Democrats enact a corporate income tax rate increase, they will have to explain why they just increased your utility bills
If President Biden and congressional Democrats hike the corporate income tax rate, Massachusetts households and businesses will get stuck with higher utility bills. Democrats plan to impose a corporate income tax rate increase to 28%, even higher than communist China's 25%. This does not even include state corporate income taxes, which average 4 - 5% nationwide.
Customers bear the cost of corporate income taxes imposed on utility companies. Corporate income tax cuts drive utility rates down, corporate income tax hikes drive utility rates up.
Electric, gas, and water companies must get their billing rates approved by the respective state utility commissions. When the 2017 Tax Cuts and Jobs Act cut the corporate income tax rate from 35% to 21%, utility companies worked with officials to pass along the tax savings to customers, including at least seven Massachusetts utilities.
Working with the Massachusetts Department of Public Utilities, Eversource Energy, National Grid, Unitil, Berkshire Gas, Columbia Gas of Massachusetts, Liberty Utilities and Aquarion Water Company of Massachusetts, Inc. passed along tax savings to their customers.
Eversource Energy: As noted in this February 5, 2018 Massachusetts Department of Public Utilities Press Release:
To ensure Massachusetts ratepayers receive the benefit of recent federal tax cuts, the Department of Public Utilities (DPU) ordered NSTAR Electric Company (NSTAR) and Western Massachusetts Electric Company (WMECo), together doing business as Eversource Energy, to reduce rates due to the federal tax law in their base rates that will take effect on February 1, 2018. Additionally, in an effort to capture savings for ratepayers in the Commonwealth, DPU opened an investigation to analyze how the recently enacted federal tax reform may affect gas, electric, and water utility rates for Massachusetts utility customers.
As a result of the reduction in the tax expense and the rate consolidation of the companies, the DPU’s Order reduced the recently approved rates for Eversource Energy by approximately $56 million. Eversource customers will now see an approximately $20 million, or 1.8 percent, decrease in rates, instead of the approximately $36 million increase that was initially approved by the DPU.
National Grid: As noted in this June 30, 2018 article from The Daily News:
The state is ordering more than a dozen electric, gas and water companies to fork over $116 million in tax savings to their customers.
A directive issued Friday by the state Department of Public Utilities requires 14 publicly regulated companies — including National Grid, Eversource and Unitil — to reduce their distribution rates, effective July 1, to reflect savings from a cut in the federal corporate tax rate.
The agency says residential customers can expect average annual savings from $9 to $40 — or a 1 to 8.5 percent reduction on their bills.
Unitil: As noted in this February 28, 2020 Massachusetts Department of Public Utilities document:
In the filing, Unitil sought to increase its rates to generate $7.3 million in additional base distribution revenues. This increase included the Company’s request to transfer the recovery of $3.4 million in Gas System Enhancement Plan (“GSEP”) investments from the Local Distribution Adjustment Factor (“LDAF”) to base distribution rates. Consequently, if approved, the proposed increase in base distribution revenues of $7.3 million would be offset by a revenue decrease of $3.4 million to the LDAF, which resulted in a $3.9 million, or11.1 percent, increase over current total gas operating revenues. The Company also statedthat its requested rate increase considered the reduction in the federal corporate income tax rate that results from the Tax Cuts and Jobs Act of 2017 (“Tax Act”), which became effective January 1, 2018
Berkshire Gas: As noted in this December 10, 2018 Daily Hampshire Gazette article:
The agreement also incorporates tax savings Berkshire received as a result of the reduction of the federal corporate tax rate. That resulted from the AG’s petitioning the DPU last December to ensure that utility tax savings go to ratepayers, and not to gas, electricity, and water utility owners.
Columbia Gas of Massachusetts: As noted in this April 13, 2018 NiSource article:
The Columbia Gas request is reduced by the impact of the federal Tax Cuts and Jobs Act, which became effective on January 1, 2018. The request includes a proposal for a refund to customers of $9.1 million, beginning on the effective date of the revised rates, related to the benefit of the tax cut as of January 1, 2018. This $9.1 million refund will partially offset the $24.1 million increase in the first year the revised rates are in effect.
Liberty Utilities: As noted in this May 23, 2018 Massachusetts Department of Public Utilities Notice of Filing and Public Hearing:
On May 1, 2018, Liberty Utilities (New England Natural Gas Company) Corp. d/b/a Liberty Utilities (“Company”) filed its compliance filing in D.P.U. 18-15. The Department docketed the Company’s filing as D.P.U. 18-15-7. The Company proposes to incorporate the current corporate income tax rate in its base distribution rates beginning on July 1, 2018. The Company expects that this change will reduce its revenue requirement by approximately $929,000. The Company proposes to return any excess tax collected from January 2018 through June 2018 only if the Company’s actual return on equity (“ROE”) exceeds its allowed ROE for 2018. Finally, the Company proposes to return approximately at $2.3 million in excess ADIT over yet to be determined amortization periods, through a credit to its Local Distribution Adjustment Clause starting in November 2018.
Aquarion Water Company of Massachusetts, Inc.: As noted in this February 9, 2018 Aquarion Water Company of Massachusetts, Inc. filing:
Specifically, with this Motion, the Company is requesting to amend its initial filing submitted to the Department on April 13, 2017 to incorporate certain changes to the request for a base-rate change (the “Amendment”). Collectively, the changes to the Company’s initial filing proposed in this Amendment reduce the Company’s requested rate relief from $2.347 million to $2.121 million, or by $226,000. The reduction of the proposed requested increase is enabled by the federal “Tax Cuts and Jobs Act,” enacted December 22, 2017 (“2017 Tax Act”), along with other circumstances.
Conversely, a vote for a corporate income tax rate hike is a vote for higher utility bills as households recover from the pandemic.
Many small businesses operate on tight margins and can't afford higher heating, cooling, gas, and refrigeration costs. President Biden should withdraw his tax increases.
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