Minnesotans 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, 7:00 PM PERMALINK

If Smith and Klobuchar enact a corporate income tax rate increase, they will have to explain why they just increased your utility bills

If President Biden and Sens. Tina Smith and Amy Klobuchar hike the corporate income tax rate, Minnesota 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 Minnesota 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 Minnesota Public Utilities Commission, CenterPoint Energy, Minnesota Power, Minnesota Energy and Xcel Energy passed along tax savings to their customers.

CenterPoint Energy: As noted in an August 9, 2018 Minnesota Public Utilities Commission statement:

The Minnesota Public Utilities Commission (Commission) ordered Minnesota’s investor-owned utilities to return approximately $200 million in annual benefits reflecting lower corporate tax rates resulting from the federal 2017 Tax Cut and Jobs Act.

This $200 million in annual benefits includes the decisions made today in this current proceeding relating to accounting and taxes; the recent decisions made for CenterPoint Energy (approximately $21.3 million) and Minnesota Power (approximately $18.7 million) in their general rate cases; and a pending decision regarding Minnesota Energy Resources Corporation (currently estimated to be approximately $5.2 million) in its general rate case, which is scheduled to be taken up by the Commission in November of this year.

With respect to each regulated utility, the Commission acted to ensure that each utility’s rates reflect the new, lower federal income tax rates in the cost of providing service.

Minnesota Power: As noted in an August 9, 2018 Minnesota Public Utilities Commission statement:

The Minnesota Public Utilities Commission (Commission) ordered Minnesota’s investor-owned utilities to return approximately $200 million in annual benefits reflecting lower corporate tax rates resulting from the federal 2017 Tax Cut and Jobs Act.

This $200 million in annual benefits includes the decisions made today in this current proceeding relating to accounting and taxes; the recent decisions made for CenterPoint Energy (approximately $21.3 million) and Minnesota Power (approximately $18.7 million) in their general rate cases; and a pending decision regarding Minnesota Energy Resources Corporation (currently estimated to be approximately $5.2 million) in its general rate case, which is scheduled to be taken up by the Commission in November of this year.

With respect to each regulated utility, the Commission acted to ensure that each utility’s rates reflect the new, lower federal income tax rates in the cost of providing service.

Minnesota Energy: As noted in an August 9, 2018 Minnesota Public Utilities Commission statement:

The Minnesota Public Utilities Commission (Commission) ordered Minnesota’s investor-owned utilities to return approximately $200 million in annual benefits reflecting lower corporate tax rates resulting from the federal 2017 Tax Cut and Jobs Act.

This $200 million in annual benefits includes the decisions made today in this current proceeding relating to accounting and taxes; the recent decisions made for CenterPoint Energy (approximately $21.3 million) and Minnesota Power (approximately $18.7 million) in their general rate cases; and a pending decision regarding Minnesota Energy Resources Corporation (currently estimated to be approximately $5.2 million) in its general rate case, which is scheduled to be taken up by the Commission in November of this year.

With respect to each regulated utility, the Commission acted to ensure that each utility’s rates reflect the new, lower federal income tax rates in the cost of providing service.

Xcel Energy: As noted in this August 11, 2018 Minneapolis Star Tribune article:

Xcel Energy’s $136 million windfall from last year’s federal tax act will be passed directly to its Minnesota customers through refunds, state utility regulators ruled Thursday.

Customers of Minnesota’s other investor-owned utilities will also receive refunds — or smaller rate increases — due to the 2017 tax law, which slashed the U.S. corporate income tax rate from 35 percent to 21 percent.

Xcel’s average residential electricity customer — someone who pays $85 to $90 per month — will get a refund of about $45 as a one-time bill credit. The company’s average residential gas customer — who pays around $48 a month — will get a one-time bill credit of about $8. Xcel said it expects the refunds will be made by year’s end.

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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