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, Utah 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 Utah 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 Utah Public Service Commission, Dominion Energy and Rocky Mountain Power passed along tax savings to customers.
Dominion Energy: As noted in this February 5, 2018 Desert News article:
The Utah Division of Public Utilities has announced that federal tax savings filed by Dominion Energy will be passed to Utah consumers. The company filed for $17 million in adjustments as the result of the recently enacted federal tax cuts, explained Chris Parker, director of the state Division of Public Utilities.
Utah utility customers should expect to begin seeing savings over the next few months, Parker said, with the first wave of cuts expected to take effect within the next 30 days, providing $2.5 million in savings on infrastructure.
The division is working with other agencies to immediately lower base rates to customers by an additional $14.5 million, he said, with further reductions to follow Dominion Energy’s gas cost filing later this spring.
Rocky Mountain Power: As noted in this October 2020 Utah Public Service Commission Document:
Further, the Company continues to propose to offset the base rate increase, in part, for two years by refunding a portion of the deferred tax savings associated with the Tax Cuts and Jobs Act (“TCJA”). Specifically, the Company proposes to pass back approximately $62.7 million of the TCJA deferred tax balance over two years. After consideration of interest, $38.2 million will be returned in 2021 and $26.8 million in 2022. This will result in a 1.1 percent increase in 2021, another 1.1 percent increase in 2022 when the credit is reduced, and a 1.3 percent increase in 2023 when the remaining tax deferral is fully refunded and the credit is eliminated. Further, the Company would align the credit in 2021 with the two-step base rate change such that the credit would be increased in the latter half of the year to fully offset the second base rate increase. However, as I explain later in my testimony, the Company is not opposed to refunding the TCJA deferred tax balance over a longer period of time provided the balance is used to offset the overall proposed base rate increase.
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.