If Tester enacts a corporate income tax rate increase, he will have to explain why he just increased your utility bills
If President Biden and Senator Jon Tester hike the corporate income tax rate, Montana 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 two Montana 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 Montana Public Service Commission, Montana-Dakota Utilities and NorthWestern Energy passed along tax savings to customers.
Montana-Dakota Utilities: As noted in a 2018 Montana Public Service Commission release:
The Montana Public Service Commission voted unanimously to approve an agreement for Montana-Dakota Utilities’ electric business to refund to consumers the benefits they received from the Tax Cuts and Jobs Act. The agreement, or Stipulation, calls for a $1.5 million consumer refund as a result of the TCJA.
NorthWestern Energy: As noted in this April 3, 2018 Billings Gazette article excerpt:
The tax savings stem from the Republican Tax Cuts and Jobs Act, which Congress passed in December and was signed into law by President Donald Trump. Federal corporate tax rates fell from 35 percent to 21 percent.
Regulated utilities like NorthWestern cannot pocket the savings, which must be shared with ratepayers, who also pay the utilities’ taxes. NorthWestern has about 345,000 customers in Montana.
NorthWestern is proposing that its natural gas customers receive direct refunds for the entire $3.154 million in tax breaks associated with the utility’s natural gas business. The company’s electric customers would receive half of the $10.8 million in tax breaks associated with NorthWestern’s electric business. Half the money would be spent removing hazard trees that pose a fire or outage risk.
“With what we proposed, for a natural gas customer, it would be about $1.18 a month. An electricity customer would be 67 cents per month,” said Butch Larcombe, NorthWestern spokesman.
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.