If Ossoff and Warnock enact a corporate income tax rate increase, they will have to explain why they just increased your utility bills
If President Biden and Sens. Jon Ossoff and Raphael Warnock hike the corporate income tax rate, Gerogia 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 two Georgia 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 Georgia Public Service Commission, Georgia Power and Atlanta Gas Light passed along tax savings to their customers.
Georgia Power: As noted in this March 6, 2018 Georgia Power press release:
Georgia Power has completed an assessment of the impact of the Tax Cuts and Jobs Act for the company – including approximately $1.2 billion in benefits for customers. The benefits were confirmed as part of an agreement with Georgia Public Service Commission (PSC) Staff and include approximately $130 million in reduced taxes on financing costs for the Vogtle nuclear expansion; $330 million in direct credits to customers as a result of lower federal income tax rates over the next two years and approximately $700 million in future benefits to be addressed in the company’s next base rate case in 2019, which also includes the benefits of last week’s reduction in state of Georgia income tax rates. If approved by the Georgia PSC, the typical residential customer using an average of 1,000 kilowatt-hours per month could receive approximately $70 in refunds over the two-year period.
“We are committed to offering the highest customer value with rates below the national average, and we’re pleased to be able to continue to pass the benefits of the new tax laws on to our customers,” said Paul Bowers, chairman, president and CEO of Georgia Power.
Atlanta Gas Light: As noted in this May 15, 2018 Atlanta Gas Light press release:
The Georgia Public Service Commission (PSC) today voted to approve a stipulation reached between its staff and Atlanta Gas Light Company (Atlanta Gas Light) that provides for $82 million in customer benefits stemming from the Tax Cuts and Jobs Act (TCJA) of 2017, including $16 million in rate credits to be passed on to Atlanta Gas Light customers beginning in July.
“We are committed to providing efficient and effective energy solutions to our communities,” said Bryan Batson, president of Atlanta Gas Light. “The PSC’s order strikes the proper balance of allowing Atlanta Gas Light to continue making important safety and modernization investments in infrastructure programs while returning the net benefits of tax reform to customers.”
The stipulation recognizes the benefits of the federal tax reform law, including the lowering of the federal corporate income tax rate from 35 to 21 percent. It also factors in the negative impacts to utilities, such as the loss of bonus deprecation and cash flow shortfall caused by the change in tax rates. To compensate for that loss in working capital, the PSC agreed to adjust the Company’s equity ratio, which should benefit the utility and customers by helping protect credit ratings and preserve lower borrowing costs.
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.