If Sinema and Kelly enact a corporate income tax rate increase, they will have to explain why they just increased your utility bills

If Sens. Kyrsten Sinema and Mark Kelly hike the corporate income tax rate, Arizona households and businesses will get stuck with higher utility bills as the country tries to recover from the pandemic.

Democrats plan to impose a corporate income tax rate increase to 26.5%, even higher than communist China's 25% and higher than the developed world average of 23.5%. 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 state officials to pass along the tax savings to customers, including at least ten Arizona utilities.

The savings typically come in the form of a rate reduction, a bill credit, or a reduction to an existing or planned rate increase. 

According to a report published in the trade publication Utility Dive, customers nationwide were to receive a $90 billion utility benefit from the Tax Cuts and Jobs Act:

Estimates derived from 2017 annual SEC 10-K filings indicate that the 14-percentage-point reduction in the corporate tax rate enacted under the 2017 Tax Cuts and Jobs Act (TCJA) resulted in investor-owned utilities establishing significant regulatory liability balances, totaling approximately $90 billion to be refunded back to customers.

Americans for Tax Reform has compiled a 90-second nationwide utility savings video from local news reports which may be viewed here.

If Democrats now impose a corporate income tax rate increase, they will have to reckon with local news coverage noting utility bills are going up. A vote for a corporate income tax hike is a vote for higher utility bills as households try to recover from the pandemic.

Tax Cuts and Jobs Act Impact: Working with the Arizona Corporation Commission, EPCOR, Arizona Public Service, Bermuda Water Company, Liberty Utilities, Quail Creek, Tucson Electric Power Company, Alliant Gas, Southwest Gas Corporation, Arizona Water Company and UNS Electric, Inc. passed along tax savings to their customers. 

Arizona Public Service (Arizona): The utility passed along savings to customers. As noted in this January 9, 2018 APS document:

APS has requested the Arizona Corporation Commission approve a $119 million bill reduction for customers, based on federal corporate tax cuts, effective February 1, 2018.

If approved, the $119 million decrease will offset the $95 million revenue increase that resulted from APS’s last rate review. The savings of $0.004258/kWh will be passed directly to customers through the Tax Expense Adjustor Mechanism (TEAM), a new adjustor mechanism that was included in the company’s rate review, and customer savings will vary with actual energy usage. APS customers would receive the credit on their monthly bill.

EPCOR (Arizona): The utility passed along savings to customers. As noted in this June 12, 2018 EPCOR press release:

More than 57,000 EPCOR wastewater customers will receive more than $1.1 million in federal corporate tax cut savings, reducing the amount of their monthly wastewater bill starting with the July 2018 billing cycle. 

Today, the Arizona Corporation Commission (ACC) approved EPCOR’s request to refund $1,106,392 in tax reform savings to all of the company’s residential and commercial wastewater customers.

“We are extremely pleased to help our wastewater customers save more than $1 million each year, and it’s important to us that we put this into effect as soon as possible,” commented Joe Gysel, President of EPCOR USA, Arizona’s largest regulated water utility. “All our customers deserve to share in the savings generated by federal tax reform. It's positive for them, for their communities and for our state.”

Bermuda Water Company (Arizona): As noted in this August 24, 2018 Prescott eNews excerpt:

The Arizona Corporation Commission is following through on its promise to pass savings created by the Tax Cuts and Jobs Act to Arizona utility ratepayers. As of August, the effort has totaled $189,088,437.

At the August Open Meeting, the Commission addressed tax adjustments for both the Quail Creek and Bermuda Water Companies. The largest tax adjustment occurred earlier this year when the Commission approved a $119 million dollar reduction to benefit APS customers.

Liberty Utilities (Arizona): As noted in this August 24, 2018 Prescott eNews excerpt:

The Arizona Corporation Commission is following through on its promise to pass savings created by the Tax Cuts and Jobs Act to Arizona utility ratepayers. As of August, the effort has totaled $189,088,437.

The Commission has been working on rate adjustments every month since February. At the July Open Meeting, the Commission addressed federal tax adjustments for both Southwest Gas and Liberty Utilities with adjustments made to their revenue requirements of $20 million and $1.9 million respectively.

Quail Creek (Arizona): As noted in this August 24, 2018 Prescott eNews excerpt:

The Arizona Corporation Commission is following through on its promise to pass savings created by the Tax Cuts and Jobs Act to Arizona utility ratepayers. As of August, the effort has totaled $189,088,437.

At the August Open Meeting, the Commission addressed tax adjustments for both the Quail Creek and Bermuda Water Companies. The largest tax adjustment occurred earlier this year when the Commission approved a $119 million dollar reduction to benefit APS customers.

Tucson Electric Power Company (Arizona):  As noted in this April 13, 2018 Arizona Daily Star excerpt:

EP and its sister utilities “believe it is in the public interest to share a substantial portion of the expected income tax savings with their respective customers on an expedited basis,” the companies said.

TEP says its proposals may include a fast-tracked regulatory approval process to implement a billing credit as soon as possible; a higher seasonal credit that would help offset customer bills during higher usage months; or bill credits that would decline over time while still smoothing the bill impacts of future rate requests.

Alliant Gas (Arizona): As noted on the Alliant Gas website:

The Arizona Corporation Commission ordered Alliant Gas to file a rate case for its Page and Payson Divisions as part of the company’s action to refund customers the income tax reductions resulting from The Tax Cuts and Jobs Act of 2017.

Southwest Gas Corporation (Arizona): As noted on the Southwest Gas website:

The Tax Cuts and Jobs Act of 2017 reduced the federal income tax rate for corporations like Southwest Gas, and we’re passing the savings on to you. 

Arizona Water Company (Arizona): As noted in this March 15, 2018 Casa Grande Dispatch excerpt:

Arizona Water Company presented a plan to the Arizona Corporation Commission Tuesday to reduce customer rates in its western group, which includes Casa Grande, Coolidge and Stanfield.

Commissioners want to assure federal tax reform law directly benefits utility customers by passing federal tax savings on to the ratepayers, according to a press release. Commissioners have voted to award federal tax reform money directly to utility customers.

Going forward, commissioners voted to ensure a 3.6-percent rate reduction in monthly rates for the western group and a 4-percent reduction in monthly rates for the northern group.

UNS Electric, Inc. (Arizona): As noted in this UNS Electric, Inc. document:

The purpose of the Tax Adjustment is to address changes in the Company’s federal income tax rate until such changes are reflected in the Company’s next general rate case. The savings will be returned through a combination of (i) a per kilowatt-hour (“kWh”) bill credit for all customer classes and (ii) a regulatory liability that reflects the deferral of the return of a portion of the savings (which will be returned to customers in the Company’s next rate case). 

For 2019 (and subsequent years), the tax savings to be returned to customers will be calculated as for 2018 and will reflect the effective federal income tax rate applicable for that tax year.

Conversely, if Biden and Democrats raise the corporate tax rate, they will add to the burden faced by working families. And any small businesses operate on tight margins and can't afford higher heating, cooling, gas, and refrigeration costs.

President Biden should withdraw his tax increases.

Congressional Democrats are about to unveil a federal corporate income tax rate hike from 21% to 26.5%. This would leave the U.S. at a competitive disadvantage vs. China and Europe.

A 26.5% federal corporate tax rate would result in a combined federal and state rate of 31%, higher than China and higher than America's major economic competitors. The developed world average (OECD) is 23.5%.

U.S. Federal + State Tax Rate Under Democrat Plan: 31% 

China's Corporate Tax Rate 25% 

Developed World (OECD) Average National + Subnational Rate: 23.5%

"Raising the corporate tax rate is Biden's next big mistake," said Grover Norquist, president of Americans for Tax Reform. "A corporate tax hike will decrease wages, increase prices, and hurt American competitiveness."

The Democrat proposal is contrary to the wishes of voters who want the U.S. corporate income tax rate to be competitive with China, according to polling conducted by HarrisX.

After voters were informed that China has a 25 percent corporate rate, they were asked “At what level should the US set the corporate tax rate?” Among all respondents, the median answer was 21 percent.

A Corporate Tax Hike Would Hit Small Businesses Organized as C-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 over 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.

A recent study from the U.S. Chamber of Commerce found that 1.4 million small businesses organized as C-corporations will get hit by Biden's corporate tax rate hike.

Biden claims his tax plan makes large corporations pay their “fair share.” However, the plan will raise taxes on many small businesses that are structured as corporations.

Workers 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 (or not at all), 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. 
• 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.  

A Corporate Income Tax Hike Would Increase the Cost of Goods and Services

Raising the corporate income tax would cause prices to increase for American consumers in a couple ways. A 2020 study by the National Bureau of Economic Research found that 31% of the corporate tax falls on consumers. Additionally, customers directly bear the cost of corporate income taxes imposed on utility companies. In this way, customers would have to pay more for their utility use. 

Already, inflation levels are rising. Consumer prices increased by 5.4 percent on an annualized basis in July, according to the Bureau of Labor Statistics (BLS). In January 2021, before Joe Biden took over the presidency, annual inflation was at a stable 1.4 percent. If Americans are struggling to afford goods and services now, they certainly will be after the corporate income tax is implemented.

A 26.5% Corporate Tax Rate Would Threaten American Life Savings

A corporate tax increase will threaten the life savings of families by reducing the value of publicly traded stocks in brokerage accounts or in 401(k)s. Individual investors opened 10 million new brokerage accounts in 2020 and at least 53% of households own stock. In addition, 80 million to 100 million people have a 401(k), and 46.4 million households have an individual retirement account.  

President Biden and Democrats continually claim their tax hikes will hold middle class families and small businesses harmless. However, the facts do not support this case. If Democrats have their way and raise taxes, millions of main street businesses, low- and middle-income workers, and retirees will be hit. Lawmakers must reject the 26.5% corporate income tax rate hike.

Yesterday, in a devastating blow to public health, President Biden's FDA bowed to radical anti-science political activists late yesterday and refused to grant PMTA authorizations to any life-saving reduced risk tobacco alternative vaping product. As a result, it is now illegal to sell any vaping product in the United States.

While the FDA has already rejected many applications hundreds of companies remain in limbo as the FDA refuses to finalize their applications, despite a September 9 deadline. It is now illegal to sell any vaping product without FDA authorization.

These outrageous now regulations were imposed even though these products are proven to be 95% safer than combustible tobacco, 3-7 times more effective than other nicotine replacement therapies, and, according to Georgetown University Medical Center, having the potential to save up to 6.6 million American lives. For this reason, they are endorsed by over 50 of the world’s leading medical organizations.  And it is now illegal to sell any of them.

While the FDA has stated it will use its discretion in enforcing the law while outstanding applications are pending, so far, it has rejected every application it has ruled upon. Moreover, in its rulings, it has demanded that individual vape manufacturers would have needed to supply a “randomized controlled trial or longitudinal cohort study,” costing hundreds of thousands of dollars, for every product, variety, or strength or e-liquid a manufacturer develops. Even the smallest of vape stores sell hundreds of different products. In order to have any chance of approval, they would have to spend over a hundred million dollars – something impossible.

As a result, it is now almost certain that thousands of independent vape shops will shut down. Millions of former smokers who rely on vaping devices will gradually return to smoking, with deadly consequences.

Smoking kills seven million Americans annually - twice as many as have been killed thus far by the Covid-29 Pandemic. For the FDA to rule that tens of millions of smokers will be unable to quit their deadly habit through a scientifically proven reduced risk alternative will leave a long-term death toll far higher than Covid ever would.

House Democrats are proposing a new energy tax as a means of financing their $3.5 trillion ($3,500,000,000,000) tax and spending spree, according to a fact sheet released by Democrats on the House Energy & Commerce Committee.

The tax will automatically ratchet up each year at a rate of 5% above inflation. This is a tax increase on autopilot without congress having to hold a vote on it each time.

The plan would impose a regressive carbon tax on methane emissions from oil and gas development, likely amounting to a tax increase of $10-$15 billion annually. This tax will be paid for by American households in the form of higher energy bills and higher costs of everyday products. A recent letter to Congress from the American Gas Association warned that the methane tax would amount to a 17% increase on an average family's natural gas bill.

This tax increase would violate President Biden’s pledge not to raise any form of tax on anyone making less than $400,000 per year. Officials within the administration have repeatedly stated taxes that raise consumer energy prices are in violation of President Biden’s $400,000 tax pledge.

A recent Reuters story on Democrats’ proposals for new energy taxes even detailed how “the White House is concerned the Democrats' proposal will raise prices on a host of consumer goods, from cars to appliances, and conflict with Biden's pledge not to tax any American earning less than $400,000 per year.”  

The Democrat proposal is modeled off of legislation introduced earlier this year by Sen. Sheldon Whitehouse (D-R.I.) that would tax methane starting at a rate of $1,800/ton and then set to increase on autopilot at 5% above inflation annually.

Once this tax mechanism is in law, Democrats will gradually add other greenhouse gases and build a full-fledged carbon tax regime, with the cost burden shouldered by American households.

The same legislation also includes a market distorting import tax on crude oil and natural gas from other countries that would further increase consumer costs and likely lead to retaliatory actions from American trading partners in the form of tariffs and import taxes of their own.