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

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Posted by John Kartch and Michael Mirsky on Monday, September 6th, 2021, 2:53 PM PERMALINK

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

If President Biden and Sens. Mazie Hirono and Brian Schatz hike the corporate income tax rate, Hawaii 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 three Hawaii 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 Hawaii Public Utilities Commission, Hawaiian Electric, Maui Electric and Hawaii Electric Light passed along tax savings to their customers. 

Hawaiian Electric: As noted in this March 9, 2018 Hawaiian Electric press release:

Customers of Hawaiian Electric Company will see their bills fall as the result of an updated base-rate adjustment approved by the Public Utilities Commission (PUC) on Friday.

Changes in federal tax law reduced the corporate tax bill of Hawaiian Electric and the company announced in January it planned to pass on the savings to customers.

In February, the PUC approved an interim rate that increased the typical Oahu monthly residential bill for 500 kilowatt hours by $2.60, a 2.3 percent increase. It was the first increase to base rates in six years.

At the time, Hawaiian Electric said it was continuing to review the impact of the new tax law and that an updated rate filing would be made once the amount to be returned to customers was calculated. Hawaiian Electric made similar rate reductions in 1987 and 1989 following changes to federal tax law.

Under the new base rate approved Friday, the impact of the reduced tax collection is about $3.36 per month, resulting in the typical Oahu residential bill falling by about 76 cents from what it had been before the February rate increase.

Maui Electric: As noted in this January 10, 2018 Hawaiian Electric press release:

The 460,000 customers of the Hawaiian Electric Companies could see lower electric bills as a result of the federal corporate income tax cut. Changes to federal tax law will lower corporate rates from 35 percent to 21 percent starting this year. That is expected to result in a lower tax bill for Hawaiian Electric, Maui Electric and Hawaiʽi Electric Light. State and federal taxes are included in the base electric rate and with a lower federal tax, the tax rate imbedded in the bill will be reduced. “We’re in the process of analyzing the impact of the tax overhaul but it’s pretty clear at this point that this will benefit most customers,” said Tayne Sekimura, senior vice president and chief financial officer of the Hawaiian Electric Companies. “We will work with our regulators and the Consumer Advocate to determine the exact amount of the tax reduction and the best way to pass on the savings.” Any change in the base rate is subject to the approval of the Public Utilities Commission, which will also determine the timing of any change in rates.

Hawaii Electric Light: As noted in this March 28, 2018 Hawaiian Electric press release:

Hawaii Electric Light customers will see lower electric bills if a rate adjustment proposal submitted to the Public Utilities Commission (PUC) is approved.

The proposal will lower the typical bill for a Hawaii Island residential customer using 500 kilowatt hours by $4.97 a month. The effective date of the new rate will be determined by the PUC.

Changes in federal tax law reduced Hawaii Electric Light's corporate tax bill. In January, the company announced it planned to pass on the savings to customers.

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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