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, North Carolina households and businesses will get stuck with even higher utility bills.

Democrats plan to impose a corporate income tax rate increase to 28%, even higher than communist China's 25%. 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 officials to pass along the tax savings to customers, including at least two North Carolina utilities.

Working with the North Carolina Utilities Commission, Duke Energy Carolinas and Duke Energy Progress passed along tax savings to their customers.

As noted in this February 1, 2018 Duke Energy press release:

Duke Energy today outlined its proposal to pass along savings from the new federal tax law to its North Carolina customers in ways that will lower bills in the near term and help offset increases in the future.

Duke Energy Carolinas (DEC) and Duke Energy Progress (DEP) offered the proposal in a filing with the North Carolina Utilities Commission (NCUC) today. Duke Energy has maintained customers' rates significantly below the national average for many decades while providing safe, reliable and increasingly clean energy for North Carolinians.

"This is a unique opportunity that allows us to reduce customer bills in the short term while also helping to offset future rate increases," said David Fountain, Duke Energy's North Carolina president. "With a balanced approach, our customers can benefit from a reduction in the corporate income tax rate, while we continue to make smart investments on behalf of our customers."

As noted in this June 22, 2018 North Carolina Utilities Commission press release: 

One of the primary drivers for the order to reduce rates is the passage of the Federal Tax Cuts and Jobs Act, which reduced the corporate income tax rate from 35% to 21%.

Conversely, a vote for a corporate income tax rate hike is a vote for higher utility bills as households try to recover from the pandemic.

Many small businesses operate on tight margins and can't afford higher heating, cooling, gas, and refrigeration costs. President Biden should withdraw his tax increases.

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, South Carolina households and businesses will get stuck with even higher utility bills.

Democrats plan to impose a corporate income tax rate increase to 28%, even higher than communist China's 25%. 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 officials to pass along the tax savings to customers, including at least four South Carolina utilities. The savings take the form of either a rate reduction, or, a reduction to an existing/planned rate increase.

Working with the South Carolina Public Service Commission, Duke Energy, Dominion Energy, Palmetto Utilities Inc. and South Carolina Gas and Electric passed along tax savings to their customers.

South Carolina Gas and Electric: As noted in this August 31, 2018 South Carolina Public Service Commission document: 

In recognition of the Tax Cuts and Jobs Act of 2017 (“Tax Reform”), SCE&G shall provide customers a retail electric service bill credit equal to 4.42% of their billed rate schedule charges, excluding past due amounts, interest, penalties, non-standard service charges, franchise fees, and sales taxes. This bill credit shall be fixed at this amount for bills rendered after the effective date of this rider and before January 1, 2021 or until such earlier date as the Public Service Commission of South Carolina replaces it with a different calculation for applying the impact of the Tax Reform.

Palmetto Utilities Inc.: As noted in this July 13, 2020 The Post and Courier excerpt:

The rate hike would be lower in the first year because the utility agreed — as a stipulation of the settlement — to pass along to customers its savings from the 2017 Tax Cuts and Jobs Act.

The utility would agree not to seek another rate hike until 2023.

Duke Energy: As noted in this June 3, 2019 Duke Energy press release:

The changes in customer rates come after a lengthy and very public process evaluating a request that is at the heart of the company’s ability to build a smarter energy infrastructure for South Carolina. The new rates also reflect the company’s efforts to deliver electricity that is cleaner than ever, and ensure the best customer service possible. The new rates will also reflect savings from recent tax reform.

Dominion Energy: As noted in this June 14, 2019 Dominion Energy letter:

Additionally, pursuant to PSC Order No. 2018-308 issued in Docket No. 2017-381-A related to The Tax Cuts and Jobs Act ("Tax Act"), the PSC requires utilities to track and defer as a regulatory liability the effects resulting from the Tax Act. The Total as Adjusted ROE of 7.05% includes the estimated impact of the Tax Act on SCE&G's base retail electric business for the twelve-months ended March 31, 2019.

Certain accumulated deferred income taxes contained within net regulatory liabilities represent excess deferred income taxes arising from the re-measurement of deferred income taxes upon the enactment of the Tax Act. These amounts will be amortized to the benefit of customers as prescribed in PSC Order No. 2018-804.

Conversely, a vote for a corporate income tax rate hike is a vote for higher utility bills as households try to recover from the pandemic.

Many small businesses operate on tight margins and can't afford higher heating, cooling, gas, and refrigeration costs. President Biden should withdraw his tax increases.

President Joe Biden’s Fiscal Year 2022 budget proposal calls for 30 tax increases on American individuals and businesses totaling $2.975 trillion over the next decade. 

The budget also calls for new IRS “enforcement” measures carried about by 87,000 new IRS agents that Biden claims will squeeze taxpayers for an additional $787 billion. 87,000 IRS agents could fill Nationals Park twice.

Combined, these proposals would increase federal revenues by $3.76 trillion over the next decade. 

The list of 30 tax increases is below: 

1. Raise the corporate income tax rate to 28 percent: $857 billion tax increase 

After accounting for state corporate taxes, Biden will give the U.S. a 32 percent corporate rate, a tax rate significantly higher than Communist China’s 25 percent tax rate. 

This tax increase will harm working families, as a significant portion of this tax is borne by workers in the form of wages and jobs. This is not a point of contention. In a 2017 report, Stephen Entin of the Tax Foundation argued that 70% of corporate taxes are borne by labor. Other economists argue that anywhere from 20% to 50%, to even 100% of the tax hits workers. 

It will also harm families by increasing the costs of household goods and services. A 2020 study by the National Bureau of Economic Research found that 31% of the corporate tax falls on consumers. 

This tax increase won't just hit large businesses. One million C-corporations are classified as small employers, defined by the Small Business Administration as any independent business with fewer than 500 employees. 

A corporate tax increase will also threaten the life savings of families by reducing the value of publicly traded stocks in brokerage accounts or in 401(k)s. Individual investors opened 10 million new brokerage accounts in 2020 and at least 53% of households own stock. In addition, 80 million to 100 million people have a 401(k), and 46.4 million households have an individual retirement account. 

2. Double the capital gains tax to 40.8 percent and the imposition of a second death tax by imposing capital gains taxes on unrealized assets at death: $322 billion tax increase 

The U.S. currently has a combined capital gains rate of over 29 percent, inclusive of the 3.8 percent Obamacare tax and the 5.4 percent state average capital gains rate. Under Biden, this rate would approach 50 percent. This would give the U.S. a capital gains tax that is significantly higher than foreign competitors. 

Under Biden’s plan, Californians will pay a top capital gains tax rate of 56.7 percent (37% + 3.8% + 13.3% California state rate = 56.7%). New Yorkers will pay a top capital gains rate of 49.6%, while New Jersey taxpayers will pay a top capital gains tax rate of 51.54%.  

The budget will also impose the 40 percent capital gains tax on the unrealized gains of every asset owned by a taxpayer when they die. This will be imposed in addition to the existing 40 percent Death Tax and will disproportionately fall on family-owned businesses, many of which are asset rich, but cash poor. 

These businesses are already forced to liquidate structures, equipment, land, and other assets because of the Death Tax. Repealing step-up in basis will compound this problem and force family-owned businesses to sell a significant portion of their business or go into significant debt to pay their tax liability. 

Taking away step-up in basis has already been tried and failed. In 1976 congress eliminated stepped-up basis but it was so complicated and unworkable it was restored in 1980.

As noted in a July 3, 1979 New York Times article, it was "impossibly unworkable": 

“Almost immediately, however, the new law touched off a flood of complaints as unfair and impossibly unworkable. So many, in fact, that last year Congress retroactively delayed the law's effective date until 1980 while it struggled again with the issue.” 

3. Increase the top income tax rate to 39.6 percent: $132 billion tax increase 

This tax increase will hit small business that are organized as sole proprietorships, LLCs, partnerships and S-corporations. These “pass-through” entities don’t pay taxes themselves but pay taxes through the individual side of the tax code. 

A significant portion of business income is paid through the individual side of the tax code. As noted in a Senate Finance Committee report, "in 2016, only 42 percent of net business income in the United States was earned by corporations, down from 78.3 percent in 1980." 

4. Impose a 15 percent minimum tax on “book income”: $148 billion tax increase 

This tax increase will create a new minimum tax on American businesses and disallow important, bipartisan credits and deductions that help promote job creation and economic growth.  

The Left routinely disparages businesses that lower their federal income tax liability through the use of credits and deductions, falsely arguing that these businesses are using tax loopholes. In reality, these businesses are using a number important, bipartisan tax provisions, like research and development tax credits, full business expensing, and the deduction for net operating losses. 

For instance, in 2009, Speaker Pelosi hailed legislation expanding NOLs, arguing the provision helps businesses “succeed” and “hire new people.” Similarly, President Obama pushed to expand full business expensing, arguing it would be a “strong incentive to increase investment.” 

5. Create a 21 percent global minimum tax: $533 billion tax increase 

This would modify existing international tax rules to create a 21 percent global minimum tax on American businesses operating overseas. 

This will impose double taxation on American businesses and make it difficult for them to compete against foreign companies. Under Biden’s plan, an American business operating in the United Kingdom will face British taxes and then American taxes. By comparison, a British business operating in the U.S. will only pay U.S. taxes because the UK has a territorial system that only taxes income earned in that country. 

6. Repeal the deduction for foreign-derived intangible income: $123 billion tax increase 

This will impose a steep tax increase on American businesses that house their intellectual property in America. 

7. Replace the Base Erosion Anti-Abuse Tax (BEAT) with the Stopping Harmful Inversions and Ending Low-Tax Developments (SHIELD) Rule: $390 billion tax increase 

This would replace the BEAT with a new minimum tax set at either 21 percent or a rate agreed to by the Organisation for Economic Co-operation and Development. 

Treasury Secretary Janet Yellen wants to surrender U.S. sovereignty to the OECD and the G20, a group that includes China and Russia. She has previously stated she wants to “end the pressures of tax competition” and “make all citizens fairly share the burden of financing government.” 

8. Raise taxes on 1031 Like-kind exchanges: $19.5 billion tax increase 

The budget proposes disallowing taxpayers from utilizing 1031s if they have gains exceeding $500,000. 1031s are not a tax loophole as some claim but are important tax provisions promoting reinvestment and liquidity. Repealing this provision would harm smaller real estate investors by forcing them to forego new investments or go into debt to finance transactions. 

1031s are typically used for smaller real estate transactions. According to the National Association of Realtors, 1031s were used in about 12 percent of real estate sales. Almost 85 percent of these transactions were from smaller investors such as sole proprietorships or S corporations. 

Repealing 1031s would harm investment in property. It would increase holding periods as taxpayers would be encouraged to retain assets longer to avoid paying capital gains taxes. In fact, due to the added complexities of financing projects and taking on debt, an estimated 40 percent of real estate transactions would not have occurred without 1031s. 

9. Limit foreign tax credits from sales of hybrid entities: $436 million tax increase 

This proposal would prohibit American businesses from claiming foreign tax credits on certain foreign acquisitions. 

10. Deny businesses tax deductions related to certain international investment: $112 million tax increase 

11. Restrict interest deductions for certain financial reporting groups: $18.6 billion tax increase 

12. Makes permanent the cap on passthroughs deducting net operating losses: $42.9 billion tax increase 

The provision makes the $500,000 cap on passthrough businesses deducting excess business permanent. This could impact a restaurant, retailer, or other capital-intensive business that sees significant business losses in any year due to the cost of wages, rent, new equipment, inventory, and interest payments. 

The cap was originally created by the Tax Cuts and Jobs Act passed by Congressional Republicans. It was used to offset the creation of the 20 percent deduction for passthrough businesses, which resulted in a net tax cut for taxpayers. The budget proposes making the cap permanent, but not the 20 percent deduction, resulting in a significant tax increase. 

13. Increase taxes on carried interest capital gains: $1.5 billion tax increase 

In addition to raising the capital gains tax, Biden would increase taxes on carried interest capital gains. Not only would this have the same negative impact as the capital gains tax increase, but it will also threaten the retirement savings of Americans across the country. 

Carried interest is the tax treatment for investment made by private equity investors. Private equity is an investment class structured as a partnership agreement between an expert investor and individuals with capital. 

Private equity seeks to invest in companies with growth potential and, as a result, has the potential to deliver strong returns. In fact, according to a recent study, private equity returned gains exceeding 15 percent over 10 years. 

Because of these strong gains, private equity is a popular and reliable investment strategy for Americans across the country. The largest investor in private equity is public pension funds, which have collectively invested an estimated $150 billion in private equity. As noted by one study, 165 funds representing 20 million public sector workers have invested an average of 9 percent of their portfolios in private equity. 

The financial security these returns provide to American savers, including firefighters, teachers, and police officers, will be threatened if lawmakers raise taxes on carried interest capital gains. 

14. Close the “Biden” loophole on Medicare Payroll Taxes: $236 billion tax increase 

The budget proposes disallowing taxpayers from using passthrough entities like S-corporations to avoid the 3.8 percent Obamacare net investment income tax.  

Biden has repeatedly utilized this loophole in a practice that left-leaning tax experts described as “aggressive.” Specifically, he avoided paying $500,000 in payroll taxes including $121,000 in Obamacare taxes by sheltering $13 million of income in several S-corporations. 

It is clear hypocrisy that Biden used the same loophole that he now wants to close. Moreover, Biden supports expanding Obamacare and routinely says “the rich” need to pay their fair share. 

15. Repeal expensing of intangible drilling costs (IDCs): $10.5 billion tax increase  

The expensing of IDCs allows companies to recover costs such as labor, site preparation, equipment rentals, and other expenditures for which there is no salvage value. IDCs often represent 60 to 80 percent of total production costs. This tax hike could result in the loss of over a quarter million good-paying jobs by 2023. As a recent letter by Rep. Jodey Arrington (R-Texas) and over 50 members of Congress explains, IDCs are neither unique nor lavish tax breaks for the oil and gas industry:  

“IDCs are not credits, loopholes, or subsidies. They are ordinary and necessary deductions, and a far cry from the lavish tax credits flowing to wealthy green energy investors and electric vehicle owners. Our tax code is designed to levy taxes on net profits, not on dollars used for operational costs or capital expenditures. Every business since the inception of the tax code, has used cost recovery provisions.” 

Biden is proposing to repeal many oil and gas tax provisions even though the cost of gasoline and energy is increasing, with the cost of gas at a seven-year high.

Not only would these tax increases further increase the cost of energy, they will also threaten millions of high-paying manufacturing jobs that the oil and gas sector supports. Biden routinely claims he is a champion of high-paying manufacturing jobs, yet these tax increases undermine this claim.

16. Modify foreign oil and gas extraction income and foreign oil related income rules: $84.8 billion tax increase  

This proposal would increase taxes on foreign oil and gas extraction income for American businesses operating overseas. 

17. Repeal enhanced oil recovery credit: $7.8 billion tax increase  

This provision would repeal the 15 percent credit for eligible costs attributable to enhanced oil recovery (EOR) projects like the costs of depreciable or amortizable tangible property or intangible drilling and development costs (IDCs). This credit is a bipartisan provision to incentivize carbon capture and sequestration, ultimately leading to less greenhouse gas emissions. 

18. Repeal credit for oil and natural gas produced from marginal wells: $516 million tax increase  

This repeals a credit for oil and natural gas produced from marginal wells, which is limited to 1,095 barrels of oil or barrel-of-oil equivalents per year.   

19. Repeal capital gains tax treatment for royalties: $455 million tax increase 

Royalties received on the disposition of coal or lignite currently qualify as a long-term capital gain. The budget repeals this, requiring this income to be taxed at the higher ordinary income rate. 

20. Repeal exception to passive loss limitations provided to working interests in oil and natural gas properties: $86 million tax increase  

21. Repeal percentage depletion with respect to oil and natural gas wells: $9.2 billion tax increase  

Percentage Depletion allows taxpayers to deduct the cost of oil and gas wells as a statutory percentage of the gross income of such property. This provision is used by small, independent, and family-owned oil and gas companies, and royalty owners like farmers and ranchers. 

22. Modify tax rule for dual capacity taxpayers: $1.4 billion tax increase  

23. Increase geological and geophysical amortization period for independent producers: $2 billion tax increase  

The amortization period for geological and geophysical expenditures incurred in connection with oil and natural gas exploration in the United States is two years for independent producers and seven years for integrated oil and natural gas producers. This proposal would require these expenses to be amortized over a seven-year period. 

24. Repeal expensing of exploration and development costs: $911 million tax increase  

Producers of oil, gas, coal, and minerals can fully immediately deduct 70 percent of the costs associated with exploration and development of a domestic ore or mineral deposit. The remaining 30 percent can be deducted over 60 months. This proposal would repeal this provision, requiring these costs to be depreciated over many years. 

25. Repeal percentage depletion for hard mineral fossil fuels: $1.3 billion tax increase  

Repeals a provision of the tax code that allows companies to deduct 10 percent of their sales revenue to reflect the declining value of their investment. 

26. Repeal the exemption from the corporate income tax for fossil fuel publicly traded partnerships: $1 billion tax increase  

Partnerships that derive at least 90 percent of their gross income from depletable natural resources, real estate, or commodities are exempt from the corporate income tax. Instead, they are taxed as partnerships. This proposal would repeal this provision for publicly traded fossil fuel partnerships, requiring them to be taxed as corporations.   

27. Repeal the Oil Spill Liability Trust Fund (OSTLF) excise tax exemption for crude oil derived from bitumen and kerogen-rich rock: $395 million tax increase  

Because crude oil derived from bitumen and kerogen-rich rock are not treated as crude oil or petroleum products, it is exempt from the Oil Spill Liability Trust Fund tax of $0.09 per barrel of crude oil. This proposal would repeal this exemption. 

28. Repeal amortization of air pollution control facilities: $901 million tax increase   

Under current law, expenses related to certain pollution control facilities can be amortized over 60 months or 84 months. The budget would repeal this provision, requiring these expenses to be depreciated over 39 years.  

29. Reinstate Superfund excise taxes: $25 billion tax increase   

The proposal would reinstate the three Superfund excise taxes at double the previous rates: (1) crude oil received at a U.S. refinery; (2) imported petroleum products (including crude oil) entered into the United States for consumption, use, or warehousing; and (3) any domestically produced crude oil that is used in or exported from the United States if, before such use or exportation, no taxes were imposed on the crude oil.   

30. Modify Oil Spill Liability Trust Fund financing: $513 million tax increase  

This proposal would extend the Superfund excise tax to other crudes such as those produced from bituminous deposits as well as kerogen- rich rock. It would also extend the Oil Spill Liability Trust Fund (OSLTF) tax to include these crudes as well. It would also eliminate the eligibility of the OSLTF for drawback. 

President Joe Biden’s $6 trillion budget proposal includes $7.5 billion for “worker protection” efforts, including a new campaign to force independent contractors to reclassify as W-2 employees. 

This is part of the left’s government-wide, full-court press to destroy the gig economy and force every American to have a boss. If implemented, Biden’s plan would threaten the livelihoods of more than 58 million Americans that engage in freelance work. 

A crucial part of the gig economy’s success is that it allows Americans to put food on the table without the rigidity of a traditional employment relationship. By classifying as independent contractors, gig workers are free to set their own schedule and work at their own pace. 

As government-mandated lockdowns shuttered millions of businesses across the country, participation in the gig economy increased by 33 percent in 2020. Think of an Uber driver saving his earnings to start a business of his own, or a single mom selling crafts on Etsy to support her family. These are real Americans making ends meet and chasing their dreams, and will want these jobs around as we recover from the pandemic. 

The Biden budget funds executive branch efforts to end “the abusive practice of misclassifying employees as independent contractors.” The only problem? Independent contractors overwhelmingly prefer to remain independent contractors. According to the Bureau of Labor Statistics, fewer than 1 in 10 independent contractors would prefer a traditional employment relationship to their current setup.

The data bears out for rideshare drivers as well. Democratic-leaning Benenson Strategy Group and Republican-leaning GS Strategy Group conducted a survey which found that 77 percent of drivers say flexibility is more important than receiving benefits, a margin of more than 3-to-1. Nearly 70% of drivers would quit if they had to take on a traditional employment role with Uber. Additionally, Americans consider rideshare drivers to be independent contractors and not employees by a 3 to 1 ratio according to a landmark Pew research survey. 

The Biden Administration pledges to work with Congress to develop “comprehensive legislation” to force millions of independent contractors to reclassify as traditional employees. Big Labor’s crown jewel, the “Protecting the Right to Organize” (PRO) Act, would do just that by implementing California’s “ABC” test for independent contractors on a nationwide basis. 

Under the ABC test, businesses must prove that a contractor is doing duties “outside the usual course of work of the hiring entity” and that “the worker customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.” This significantly limits the ability of businesses to retain contractors who may operate within the scope of work sometimes performed by employees in similar circumstances. It’s an unnecessary distinction that prohibits most businesses from working with independent contractors. 

The ABC test forced the mass reclassification of California’s independent contractors, more than 90 percent of whom opposed the ABC test reclassification before it was signed into law. The law was so unpopular that 59 percent of Californians voted for Proposition 22, a ballot initiative that exempted rideshare drivers from the ABC test.  

Ultimately, the Biden budget shows that the Administration will use every tool in its arsenal to force the mass reclassification of American independent contractors, the vast majority of whom prefer the flexibility of freelancing to the rigidity of traditional employment. As our economy attempts to recover from the pandemic, the last thing we need to do is to kill job opportunities for millions of American freelancers.