Kansas 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, 11:25 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, Kansas 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 Kansas 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 Kansas Corporation Commission, Kansas City Power and Light, WeStar Energy, Kansas Gas, and Black Hills Energy passed along tax savings to customers.

Kansas City Power and Light: As noted in this Jan. 18, 2018 Kansas City Power and Light press release:

Updated rates will include an approximate $100 million benefit to Kansas and Missouri Customers

Today KCP&L announced its intention to file rate update cases with the Kansas Corporation Commission (KCC) and the Missouri Public Service Commission (MPSC) to pass approximately $100 million in annual tax savings to customers, resulting from federal tax cost reductions. The Tax Cuts and Jobs Act, which decreased the corporate tax rate from 35 percent to 21 percent, was signed into law on Dec. 22, 2017 and became effective on Jan. 1, 2018. KCP&L is committed to passing 100 percent of the benefit from this tax cut on to customers.

"We commend both the KCC and the MPSC for already initiating a process to review the impact of the federal tax reduction," said Terry Bassham, President and CEO of KCP&L. "The federal tax cut has significant benefits which should be passed on to our customers in full. We look forward to working with our regulators and stakeholders on the best way to do that."

WeStar Energy: As noted in this Jan. 18, 2018 WeStar Energy press release:

Today Westar Energy announced it will file a request before the Kansas Corporation Commission (KCC) to reflect in its electricity rates the full amount of tax savings from the change in the federal tax law. Westar said that a detailed application is being prepared and will be filed later this month or early February. The Tax Cuts and Jobs Act, which decreased the corporate tax rate from 35 percent to 21 percent, was signed into law on Dec. 22, 2017, and became effective Jan. 1, 2018. 

“We agree with the KCC Staff and others that all these tax benefits should go to our customers,” said Mark Ruelle, President and CEO of Westar. “This application to update rates starts that process.”

All utility rate changes must be approved by the KCC. That process typically takes a few months to review and confirm. While the company estimated the tax benefit to be $65 million annually, or more, the KCC Staff and other parties will confirm the precise figures before the KCC.  In addition to passing through the benefit of lower tax rates, regulators will review and update all other costs to provide electricity.”

Kansas Gas: As noted in this February 25, 2019 KWCH 12 News excerpt:

The Kansas Corporation Commission Monday issued an order instructing Kansas Gas Service to return about $16.6 million in tax savings to its customers.

The KCC says this means residential customers can expect a one-time bill credit of $21.06. The KCC says the savings resulted from the Federal Tax Cuts and Jobs Act reducing the corporate tax rate from 35 percent to 21 percent in January 2018.

Black Hills Energy: As noted in this January 14, 2019 Wichita Eagle excerpt:

About 37,000 customers in the Wichita area are getting a cut in natural gas bills starting this month to pass along federal tax reductions approved about a year ago.

Black Hills Energy customers in Wichita will see about a $7.30 reduction in their January gas bill and about a dollar a month in the future.

In total, the company is passing through about $1.7 million in annual savings to its customers, according to a statement issued Friday.

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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