Iowans 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 Wednesday, September 1st, 2021, 9:30 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, Iowa 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 Iowa 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 Iowa Utilities Board, Iowa American Water Co., MidAmerican Energy Company, Black Hills Energy and Alliant Energy passed along tax savings to customers.

Alliant Energy: As noted in this April 10, 2018 We Are Iowa article excerpt:

Alliant Energy announced this week that it will pass savings from lower federal taxes on to its customers in Iowa.

Annual savings, including tax-related savings from Alliant Energy’s transmission providers, are expected to be approximately $75 million, the company said.

“These tax savings are great for our Iowa customers and the new, lower corporate tax rate will benefit our families, businesses and communities today and in the future,” Doug Kopp, president of Alliant Energy’s Iowa energy company, said. “In the last six years, we’ve delivered about $500 million in other separate tax-related savings to customers, reducing energy costs.”

Typical residential electric customers will see an annual savings of approximately $50 to $60. Typical residential natural gas customers will see annual savings of approximately $30

Iowa American Water Co.: As noted in this Jan. 29, 2018 Des Moines Register article excerpt:

And Iowa-American Water Co., which provides service in eastern Iowa, would provide $1.5 million and $1.8 million to customers.

MidAmerican Energy Company: As noted in this April 5, 2018 Quad-City Times excerpt:

"A big part of the tax reform is the corporate income tax rate changing from 35 to 21 percent," said MidAmerican spokeswoman Tina Hoffman. "That is what the $42 million represents, with 100 percent going back to the customers."

The company expects to distribute $33 million on electrical bills and $8.8 million on natural gas bills. The total also includes annual savings for commercial and industrial consumers: $75 in electricity, $25 in natural gas for commercial customers and $8,000 in electricity, $175 in natural gas costs for industrial customers, she said.    

In addition, Hoffman said MidAmerican expects to save another $40 million to $50 million in 2018 from other tax-related benefits including new provisions related to how companies account for excess accumulated deferred taxes and depreciation. The utility plans to create an account to capture these benefits and use them to reduce the size or need for a future rate case in Iowa.

Black Hills Energy: As noted in this April 27, 2018 Iowa Utilities Board statement:

The Iowa Utilities Board issued multiple orders this week approving an estimated $78.7 million in savings for utility customers based on the IUB’s investigation and review of the tax refund proposals filed with the IUB by MidAmerican Energy, Alliant Energy-Interstate Power and Light, and Black Hills Energy regarding the 2017 federal tax reform law.

The IUB opened an investigation into the impact of the federal Tax Cut and Jobs Act of 2017 on Iowa’s rate-regulated utilities in January 2018, Docket No. INU-2018-0001. The utilities’ tax refund proposals detailing how customers would benefit are a result of this investigation. The new tax law reduced the federal corporate income tax rate from 35 percent to 21 percent.

The following tax refund proposal tariffs were approved by the IUB, subject to complaint or investigation:

Black Hills Energy will return an estimated $2.2 million to its natural gas customers in Docket No. TF-2018-0037.

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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