If Kaine and Warner vote for a corporate income tax rate increase, they will have to explain why they just increased your utility bills
If President Biden and Sens. Tim Kaine and Mark Warner hike the corporate income tax rate, Virginia households and businesses will get stuck with higher utility bills. Democrats plan to impose a corporate income tax rate increase to 28%, even higher than communist China's 25%.
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 officials to pass along the tax savings to customers, including at least twelve Virginia utilities.
Working with the Virginia State Corporation Commission, Appalachian Natural Gas, Aqua Virginia Inc., Columbia Gas of Virginia, Roanoke Gas, Virginia American Water Company, Virginia Electric and Power Company, Virginia Natural Gas, Appalachian Power, Washington Gas Light, Southwestern Virginia Gas, Atmos Energy and Dominion Energy Virginia passed along tax savings to customers.
As noted in this January 8, 2018 SCC News Release:
The legislation cuts the federal corporate income tax rate from 35% to 21% effective January 1, 2018. This tax cut, in turn, reduces the cost of service for many of Virginia’s major electric, gas and water utilities. Utility rates paid by customers are based on the cost of service.
To preserve the savings from this tax cut for customers, the Commission ordered all applicable Virginia utilities to account for the tax savings by accruing a regulatory liability on the utility’s books. The tax savings will thus be quantified and available to be passed on to customers in subsequent rate proceedings.
The utilities subject to the Commission’s order serve millions of Virginia residential and business customers. They include Virginia-American Water Company; Aqua Virginia, Inc.; Washington Gas Light; Columbia Gas of Virginia; Virginia Natural Gas; Roanoke Gas; Atmos Energy; Southwestern Virginia Gas; Appalachian Natural Gas Distribution; Kentucky Utilities; Appalachian Power Company; and Virginia Electric and Power Company.
As noted in this January 8, 2018 Washington Gas Light press release:
Washington Gas, a WGL Holdings, Inc. company (NYSE: WGL), announced plans today to file with state regulatory commissions in all three of its service territories, including the District of Columbia, Maryland, and Virginia, to pass through annual tax savings to the more than 1.1 million customers that the company serves across the region.
If the recommendations are approved, Washington Gas has committed to providing a reduction in customer rates that would lower annual customer bills by approximately $34 million, beginning in the first quarter of 2018.
The federal tax savings are driven by the Tax Cuts and Jobs Act of 2017, a new law passed on December 22, 2017, that went into effect on January 1, 2018. Reducing the corporate income tax rate from 35 percent to 21 percent lowers the amount that Washington Gas will have to pay in federal income tax.
As noted in this March 8, 2019 SCC statement:
The State Corporation Commission (SCC) has ordered a reduction in the rates of Dominion Energy Virginia and Appalachian Power Company on April 1. The reduction and forthcoming rate credits continues a directive of the Commission issued in January 2018 that ensures customers receive the benefits of the corporate tax cut contained in federal tax legislation passed by Congress in December 2017.
The federal corporate income tax rate was reduced from 35% to 21% effective January 1, 2018. A week later, on January 8, the SCC ordered the companies to preserve the savings from this tax cut for the benefit of their customers.
As noted in this WSLS 10 News Article:
The State Corporation Commission wants you to receive some of the benefits of the recent federal corporate tax cut.
The law cuts the federal corporate income tax rate from 35 percent to 21 percent.
As a result, the service cost for many of Virginia's major electric, gas and water utilities will be reduced. Those utilities include AEP, Roanoke Gas and Southwestern Virginia Gas.
Conversely, a vote for a corporate income tax rate hike is a vote for higher utility bills right as the USA is trying to recover from the pandemic.
Sens. Kaine and Warner would be wise to stay away from tax increases.