If Sanders and Leahy enact a corporate income tax rate increase, they will have to explain why they just increased your utility bills
If President Biden and Sens. Bernie Sanders and Patrick Leahy hike the corporate income tax rate, Vermont 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 Vermont 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 State of Vermont Public Utility Commission, Green Mountain Power and Vermont Gas Systems, Inc. passed along tax savings to their customers.
Vermont Gas Systems, Inc.: As noted in this February 15, 2018 State of Vermont Public Utility Commission document:
The Company’s rate filing reduces overall rates by 3.8%. This change is the result of a 4% increase in the daily access and distribution charges (collectively referred to as “base rates”), use of $8.1 million from the System Expansion and Reliability Fund (“SERF” or the “Fund”), and a decrease in the natural gas charge of 14.8%. This filing also incorporates significant savings to customers resulting from the recent reduction in the federal income tax rate. For rates that are currently in effect, customers are receiving direct bill credits as proposed by VGS, supported by the Department of Public Service (“Department”) and approved by the PUC on January 24, 2018. This rate filing incorporates these permanent tax cuts into rates for the 2019 rate year and beyond so that customers will continue to receive the full benefit of the tax change.
Green Mountain Power: As noted in this August 30, 2018 S&P Global excerpt:
The Vermont Public Utility Commission has adjusted base rates for Green Mountain Power Corp. to cover projected costs by effectively approving a nearly 2.7% increase for the fiscal year 2020 that will go into effect Oct. 1.
In an Aug. 29 decision (Docket No. 19-1932), Vermont regulators approved a 2.67% base rate hike for GMP, as recommended by the state Department of Public Service who recalculated the utility’s rate need based on proposed reductions. Énergir LP subsidiary GMP had originally asked for a higher 2.92% increase. The utility still needs to modify the rates to meet proposed reductions recommended by the DPS.
The 2.67% rate hike will be on top of a 5.43% rate increase that officially went into effect at the start of 2019 but whose impact has been mitigated so far as a result of a windfall in federal tax cuts being passed along to ratepayers in the form of credits. With the tax credits expiring at the start of October, the full weight of the 5.43% rate increase will now be borne by customers. Line items related to the emerald ash borer infestation and major storm recovery costs are also going into effect.
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.