Alaska Residents Will Get Stuck with Higher Utility Bills Due to Biden Corporate Tax Rate Hike

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Posted by John Kartch, Michael Mirsky on Thursday, September 2nd, 2021, 7:00 AM PERMALINK

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, Alaska 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 four Alaska 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 Regulatory Commission of Alaska, Alaska Electric Light and Power, Enstar Natural Gas Company, Golden Heart Utilities and College Utilities passed along tax savings to their customers. 

Alaska Electric Light and Power: As noted in this July 3, 2018 Juneau Empire excerpt:

Alaska Electric Light and Power customers will see their electric rates drop.

The Regulatory Commission of Alaska approved AEL&P’s request to pass income tax savings through to its customers. Effective Aug. 1, customers will see a 6.73 percent decrease in electric rates as a result of the Tax Cuts and Jobs Act of 2017.

Debbie Driscoll, vice president and director of consumer affairs for AEL&P, said in a phone interview with the Empire Tuesday, the amount was determined by taking the last rate increase of 3.86 percent in November 2016 and combining it with the results of the Tax Cuts and Jobs Act. The Tax Act includes provisions lowering the effective federal corporate income tax rate from a maximum of 35 percent to a flat rate of 21 percent.

Enstar Natural Gas Company: As noted in this April 18, 2018 Alaska Journal of Commerce excerpt:

Enstar Natural Gas Co. anticipates $5 million in additional revenue coming in 2018 thanks to the U.S. corporate tax rate changing from 35 percent to 21 percent and plans to cut rates for its 144,000 customers. 

Enstar’s move is among the latest by companies on how they intend to use the benefits from the recently enacted Tax Cuts and Jobs Act of 2017. 

Golden Heart Utilities: As noted in this March 7, 2018 Anchorage Daily News article excerpt:

In December, Congress passed new tax law that included a major cut to the corporate tax rate — to 21 percent from 35 percent. That will likely mean major savings for the small number of Alaska utilities that aren't cooperatives or municipally owned.

Those utilities include Enstar Natural Gas, which serves Anchorage, the Kenai Peninsula and Mat-Su; Alaska Electric Light and Power (AEL&P) in Juneau; and Golden Heart Utilities and College Utilities, water and sewer utilities in Fairbanks.

College Utilities: As noted in this March 7, 2018 Anchorage Daily News article excerpt:

In December, Congress passed new tax law that included a major cut to the corporate tax rate — to 21 percent from 35 percent. That will likely mean major savings for the small number of Alaska utilities that aren't cooperatives or municipally owned.

Those utilities include Enstar Natural Gas, which serves Anchorage, the Kenai Peninsula and Mat-Su; Alaska Electric Light and Power (AEL&P) in Juneau; and Golden Heart Utilities and College Utilities, water and sewer utilities in Fairbanks.

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.

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