If Cardin and Van Hollen enact a corporate income tax rate increase, they will have to explain why they just increased your utility bills
If President Biden and Sens. Ben Cardin and Chris Van Hollen hike the corporate income tax rate, Maryland 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 six Maryland 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 Public Service Commission of Maryland, Baltimore Gas & Electric, Potomac Electric Power Company, Eastern Shore Natural Gas, Washington Gas Light, The Potomac Edison Company and Columbia Gas of Maryland passed along tax savings to their customers.
Columbia Gas of Maryland: As noted in this April 13, 2018 Columbia Gas of Maryland press release:
Tax calculations for our customers’ rates in this filing have been made reflecting the Tax Cuts and Jobs Act of 2017 (TCJA) which was signed into law December 22, 2017. Our proposed rate adjustment reflects the new 21% corporate federal tax rate, which was reduced from 34% under the TCJA effective January 1, 2018. Additionally, customers’ bills started to reflect the new tax rate in April of 2018, and we are currently passing back to customers the difference between taxes collected at the federal 34% tax rate versus the 21% tax rate from January 1, 2018 to March 31, 2018.
Washington Gas Light: As noted in this May 15, 2018 Washington Gas Light press release:
Washington Gas lowered customers’ bills earlier this year by passing along federal corporate income tax savings as a result of the Tax Cuts and Jobs Act of 2017. Maryland customers received an annual rate decrease of $14.8 million beginning February 1, 2018, or about $2.16 per month for each residential heating customer.
Baltimore Gas & Electric: As noted in this January 4, 2019 Public Service Commission of Maryland document:
The Commission, in Order No. 88975, also directed BGE to refund approximately $1.7 million to customers as a result of excess taxes recovered in January 2018, soon after the federal Tax Cuts and Jobs Act of 2017 was implemented in December 2017. The payback must occur as a one-time bill credit within 60 days of the order.
Potomac Electric Power Company: As noted in this May 31, 2018 Public Service Commission of Maryland document:
The Settlement results in a base rate decrease of $15,000,000. Although the Company revised its original request of $41,439,000 to $3,252,000, based largely on the impact of the Tax Cuts and Jobs Act of 2017 (“TCJA”), the rate decrease of the magnitude approved by this Order is significant.
Eastern Shore Natural Gas: As noted in this March 5, 2018 Public Service Commission of Maryland document:
Additionally, the settlement provides that ESNG is required to further reduce the
settlement rates to reflect its new federal income tax rate, which will reflect impacts of the federal Tax Cuts and Jobs Act.
The Potomac Edison Company: As noted in this March 22, 2019 Public Service Commission of Maryland document:
The Company stated that the filing of its base rate case was driven by (i) investments in the electric distribution system to improve service and reliability for its customers; (ii) the desire to pass on to ratepayers the savings from the Tax Cut and Jobs Act of 2017 (“TCJA”) in a manner that is based on up-to-date, fully-vetted revenue needs and class cost allocations; and (iii) revisions to Company Tariffs necessitated by the Company’s divestiture of generation assets and the implementation of electric restructuring policies.
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.