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, Tennessee 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 five Tennessee 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 Tennessee Public Utility Commission, Chattanooga Gas Company, Tennessee American Water Company, Atmos Energy Corporation, AEP Appalachian Power, and Piedmont Natural Gas Company passed along tax savings to their customers.
AEP Appalachian Power: As noted in this February 12, 2019 AEP Appalachian Power press release:
Beginning with February bills and going forward, AEP Appalachian Power customers in Tennessee will see rate reductions as a result of the Tax Cuts and Jobs Act of 2017.
Tennessee American Water Company: As noted in this August 12, 2019 Chattanooga Times Free Press excerpt:
Chattanooga water users will soon get a reprieve on their monthly bills due to cuts in corporate tax rates and investment incentives adopted by Congress nearly two years ago.
State regulators Monday approved rate changes by the Tennessee American Water Co., which should cut the typical water bill by more than 3% and save the average residential water customer in Chattanooga about 84 cents a month, effective immediately.
The Tennessee Public Utility Commission Monday voted to pass through the Chattanooga water utility’s tax savings for the next three years through a 6.6% base rate reduction, which would reduce the average bill for a typical water customer using 4,154 gallons of water a month by $1.43 a month. At the same time, the state regulatory board approved the proposed capital cost recovery plan by Tennessee-American that calls for about a 2.6% increase, or 59 cents more a month, to the same average water bill.
Chattanooga Gas Company: As noted in this May 29, 2020 Chattanooga Gas Company press release:
To minimize impact on customers’ bills, Chattanooga Gas is proposing accelerating the return of credits stemming from the 2017 federal Tax Cuts and Jobs Act (TCJA) to customers. The different tax savings from the TCJA would have been spread over multiple years, but Chattanooga Gas is proposing crediting all savings to customers in 2020. This allows customers to receive the benefit of the tax savings sooner and offsets a portion of the bill increase related to the ARM filing.
Piedmont Natural Gas Company and Atmos Energy Corporation: As noted in this February 6, 2018, Tennessee Public Utility Commission Report excerpt:
During the Conference, the Commissioners voted unanimously to require Atmos Energy Corporation (“Atmos Energy”), Chattanooga Gas Company (“Chattanooga Gas”), Kingsport Power Company d/b/a AEP Appalachian Power (“Kingsport Power”), Piedmont Natural Gas Company (“Piedmont Natural Gas”), and Tennessee American Water Company (“Tennessee American Water”), to immediately apply deferred accounting treatment, specifically described herein, with respect to the impact of the lowering of the federal corporate income tax rate and to require the named public utilities to provide to the Commission no later than March 31, 2018, the amounts deferred and a proposal to reduce rates or otherwise make adjustments to account for the tax benefits resulting from the 2017 Tax Cuts and Jobs Act, Pub. L. No. 115-97 (“2017 Tax Act”).
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.