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, Missouri 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 Missouri 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 Missouri Public Service Commission, Ameren Missouri, Kansas City Power and Light, Missouri American Water, Spire Inc., Veolia Energy Kansas City, Inc., and Liberty Utilities passed along tax savings to their customers.
Ameren Missouri: As noted in this July 6, 2018, KTTN article excerpt:
The Missouri Public Service Commission has approved an agreement that reduces the annual electric revenues of Union Electric Company doing business as Ameren Missouri.
The rate decrease of approximately $166,500.000 reflects a reduction in the corporate tax rate from 35 to 21% as a result of the passage of the federal Tax Cuts and Jobs Act of 2017. Residential customers using 1,000-kilowatt hours a month will see electric rates decrease by about $6.21 per month, effective August 1st.
Kansas City Power and Light: As noted in this May 16, 2018 News Tribune excerpt:
Commissioners approved a stipulation and agreement filed by KCP&L Greater Missouri Operations Company (GMO). The stipulation and agreement comes after a Staff-initiated investigation into its steam service rates after the passage of the federal Tax Cuts and Jobs Act of 2017.
The agreement included a 9 percent rate increase for GMO’s steam service operations as well as the elimination of the minimum coal standard and 85 percent sharing mechanism in its current quarterly cost adjustment.
Spire Inc.: As noted in this March 22, 2018 Spire press release:
As a result of its recent rate case, Spire customers will pay less for safe and reliable natural gas service starting April 19. Typical residential customers in the St. Louis area will see their Spire natural gas bill decrease by approximately $2 per month. Spire bills remain lower than a decade ago, even while the company has upgraded hundreds of miles of pipeline across the region.
These savings are due primarily to the recent growth of Spire and federal tax reform. In the last five years, Spire has grown through acquisitions of natural gas utilities in Missouri, Alabama and Mississippi. Spire’s growth into the nation’s fifth-largest publicly traded gas utility has resulted in more than $70 million in annual savings for Missouri natural gas customers. These savings have been passed along to customers as a part of this rate case.
Spire is also the first Missouri utility to share the savings of federal tax cuts with customers. Spire asked the Public Service Commission to include the federal tax cut in the rate case to expedite savings to customers, even though the impact of tax reform fell outside the review period of the rate case.
Veolia Energy Kansas City, Inc.: As noted in this November 8, 2018 Missouri Public Service Commission document:
The agreement reflects the effect of the 2017 Tax Cuts and Jobs Act which reduced the federal corporate income tax rate from 35 percent to 21 percent for businesses, including utilities.
Missouri American Water: As noted in this May 16, 2018 News Tribune excerpt:
Water customers in Jefferson City using 5,000 gallons per month will see an increase of $4.21 per month for a total monthly bill of $40.23 plus taxes and fees, company officials said. This is an increase of approximately 11.7 percent.
“The rate request was in response to approximately $207 million of infrastructure investments made by Missouri American throughout its Missouri service areas that were not previously reflected in rates, and $48 million of previously approved Infrastructure System Replacement Surcharge investments,” said Missouri American spokesman Brian Russell. “The approved rates reflect savings of $18 million for our customers due to the enactment of the Tax Cuts and Jobs Act of 2017.
Liberty Utilities: As noted in this June 7, 2018 Missouri Public Service Commission document:
The agreement reflects the impact of the reduction in the corporate tax rate from 35% to 21% resulting from the federal Tax Cuts and Jobs Act of 2017.
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.