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 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 South Carolina 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 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, 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.