Washington, D.C. Residents Will Get Stuck with Even Higher Utility Bills Due to Biden Corporate Tax Rate Hike

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Posted by John Kartch and Michael Mirsky on Thursday, September 2nd, 2021, 9:25 AM PERMALINK

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, Washington, D.C. 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 Washington, D.C. 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 Public Service Commission of the District of Columbia, Pepco and Washington Gas Light passed along tax savings to their customers.

Washington Gas Light: As noted in this October 18, 2018 Public Service Commission of the District of Columbia document

The Public Service Commission of the District of Columbia approved an additional, one time bill credit for all Washington Gas Light Company customers in the District. (Formal Case No. 1151, Order No. 19720). The Commission took action to require Washington Gas to pass on to customers $5.2 million in additional savings that the company has realized as a result of the federal Tax Cuts and Jobs Act of 2017. The credit will appear on customer’s bills for gas distribution service during the December 2018 billing cycle, in an amount depending on the customer’s usage. For a typical residential heating/cooling customer, the credit will be approximately $20. The credit comes at a time when gas distribution bills tend to go up because of increase use for winter heating. 

This is the second time that the Commission has required Washington Gas to pass on savings from the Tax Cuts Act to customers. The Commission previously ordered Washington Gas to lower its distribution rates starting in August 2018 to reflect $8.2 million in projected annual tax savings going forward. Since that time WGL residential heating/cooling customers have received on average a monthly bill savings of about $2.63. Wednesday’s action reflects tax savings from January 1 through July 31, 2018 that were not included in the August order.

Pepco: As noted in this Jan. 5, 2018 Pepco press release:

Pepco today announced they will file with the Public Service Commission of the  District of Columbia in early February, outlining plans to provide annual tax savings to more than 296,000 electric customers in the District of Columbia. If approved, Pepco would plan to begin providing a credit lowering customer bills starting in the first quarter of 2018.       

The tax savings are the result of federal tax reductions under the new Tax Cuts and Jobs Act, which was signed into law on Dec. 22, 2017, and became effective on Jan. 1, 2018. The decrease in the Corporate Tax Rate from 35 percent to 21 percent reduces the amount of federal income tax Pepco will have to pay. 

“The tax law will result in lower bills for our customers and lower taxes for Pepco,” said Dave Velazquez, President and CEO, Pepco Holdings, which includes Pepco.

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.

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