If Duckworth and Durbin enact a corporate income tax rate increase, they will have to explain why they just increased your utility bills
If President Biden and Sens. Tammy Duckworth and Dick Durbin hike the corporate income tax rate, Illinois 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 seven Illinois 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 Illinois Commerce Commission, Ameren Illinois, Commonwealth Edison, Illinois American Water, MidAmerican Energy Company, Nicor Gas, Aqua Illinois, and Peoples Gas passed along tax savings to their customers.
MidAmerican Energy Company: As noted in this April 2, 2018 WVIK News article:
Thanks to tax reform, utility bills will start going down soon. MidAmerican Energy says bills will be lowered for its Illinois customers starting in April, and probably for Iowa customers in May.
Spokeswoman Tina Hoffman says the company’s tax rate dropped from 35 to 21 per cent, and as a result Illinois electric and natural gas customers will save about 50 dollars per year. The average Iowa customer would save 30 dollars.
But tax reform will affect more than just MidAmerican’s corporate tax rate.
“And what we’re proposing to do is create an account that captures these benefits that will help us in the long-term make sure that we reduce the size of even the need for future rate cases. So eventually that keeps rates low for customers well into the future.”
Hoffman says the Illinois Commerce Commission has already approved the company’s proposal and the savings should show up in residential bills this month. However the Iowa Utilities Board has not yet approved MidAmerican’s proposal but she thinks it could lower Iowa bills beginning in May.
Commonwealth Edison: As noted in this April 25, 2018 the Chicago Citizen press release excerpt:
The recent annual formula rate filing also included an advancement of $205 million from anticipated savings in 2019 as a result of the federal tax cut and jobs act.
“In this filing, we have proposed to the ICC that we advance into 2019 with savings that customers would realize through the lower tax rates. The formula ratemaking process allows for such timely distribution of savings. It also would help to extend the stable rate environment that we have had for some time since before the smart grid program came and launched,” said Gomez.
Ameren Illinois: As noted in this Jan. 22, 2018 Ameren Illinois press release:
Ameren Illinois electric customers could save an average of $2.50 to $3.00 per month in 2018 and natural gas customers could save an average of $1 per month if the Illinois Commerce Commission (ICC) approves the company’s plan to pass savings from the recently approved federal tax cut legislation back to its customers. Customers using both electricity and natural gas could see a combined savings.
In the proposal filed with the ICC today, the company is seeking approval to pass along federal tax savings to electric customers beginning this year. A similar proposal was filed last week on behalf of Ameren Illinois natural gas customers.
“Under the new tax plan, Ameren Illinois’ effective tax rate will decrease by nearly 13%,” said Richard Mark, chairman and president, Ameren Illinois. “The plan we have filed with the ICC gives us the ability to expedite the return of these savings to our customers.”
The Energy Infrastructure Modernization Act of 2011 provides a mechanism to return these savings to electric customers, but without filing the petition customers would have to wait until 2020 to receive the benefits. If approved by the ICC, Ameren Illinois customers will begin seeing these savings in March.
Illinois American Water: As noted in this May 7, 2018 American Water press release:
The Federal Tax Cuts and Jobs Act decreased the corporate tax rate from 35 percent to 21 percent. On April 19, 2018, the Illinois Commerce Commission approved an order for Illinois utilities to pass savings from the national tax reform on to customers.
Illinois American Water is returning about $10.8 million to customers over the next 11 months. Illinois American Water customers will see a credit on their May 2018 bill continuing through March 2019. After this initial 11-month timeframe, the credit amount will be reconciled and adjusted appropriately. The new credit amount will be communicated at that time.
According to Illinois American Water President Bruce Hauk, the credit to bills is a benefit provided through the financial model of a regulated investor-owned utility. He said, “We are pleased to be able to share this savings with our customers. In addition to this savings, our team works hard every day to control operational and maintenance costs so we can invest in our critical infrastructure and minimize impact to customer bills.”
Nicor Gas: As noted in this January 15, 2018 Ford County Record excerpt:
Nicor Gas plans to file testimony with the Illinois Commerce Commission seeking approval to pass along tax-reduction savings to its 2.2 million natural gas customers in Illinois.
If the new program is approved, Nicor Gas will begin providing a credit to lower customers’ bills.
The tax savings are the result of a new federal law, the Tax Cuts and Jobs Act, which was signed into law Dec. 22, 2017, and decreased the corporate tax rate from 35 percent to 21 percent. The tax reduction, coupled with other provisions impacting the way that natural gas utilities calculate their federal income tax liability, is anticipated to produce tangible savings, which will benefit Nicor Gas customers this year.
Aqua Illinois: As noted in this March 10, 2018 the News-Gazette excerpt:
Ervin said the lower rate was made possible by the Tax Cuts and Jobs Acts of 2017, aimed at cutting taxes on individuals and businesses, stimulating the economy and creating jobs. It substantially reduces the corporate tax rate from a maximum of 35 percent to a flat rate of 21 percent, and is estimated to save the water company about $4.5 million.
Peoples Gas: As noted on their homepage:
We are proud to be able to say that our rates have declined during the past 12 years. In 2019, we reduced our rates by passing benefits created by the federal Tax Cuts and Jobs Act to customers. Very few businesses can say that their rates or prices have remained unchanged or even declined over a period of more than a decade. Here’s a look at the 2021 rate for RS-2 customers and the cost increases of a variety of common household items since 2009.
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.