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, Wyoming 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 four Wyoming 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 Wyoming Public Service Commission, Black Hills Energy, Black Hills Wyoming Gas, LLC, Montana-Dakota Utilities Co. and Rocky Mountain Power passed along tax savings to their customers.
Black Hills Energy: As noted in this September 23, 2019 ShortGO article:
Black Hills Energy’s Cheyenne electric utility customers are seeing benefits of the federal corporate tax rate reduction from 35 percent to 21 percent on September bills. The Wyoming Public Service Commission (WPSC) approved a proposal to return the tax savings stemming from the Tax Cuts and Jobs Acts for 2018 and 2019 in the form of a one-time bill credit to customers on their September bills.
The residential customer credit is $83.62, the commercial customer credit is $147.37, the Secondary General customer credit is $3,586.24, and the Primary General Service customer credit is $32,810.64. Customers will see slightly different amounts on their bill based on the refund impacts on taxes and fees included on the bill.
Black Hills Wyoming Gas, LLC: As noted in this March 10, 2020 Black Hills Wyoming Gas document:
The TCJA Amortization Credit refunds the net Non-Protected excess deferred income tax items owed to customers resulting from the Tax Cuts and Jobs Act. These tax items include the Non-Protected Property Rate Base amounts owed to customers, the Non-Protected Non-Property Rate Base amounts owed by customers, and the Non-Refunded ARAM from 2018 and 2019 owed to customers. The total amount to be returned to customers through the TCJA Amortization Credit is $1,672,740 as approved by the Commission in Docket No. 30026-2-GR-19.
Montana-Dakota Utilities Co.: As noted in this Montana-Dakota Utilities Co. document:
Wyoming customers of Montana-Dakota Utilities Co. (Montana-Dakota) who were billed for electric service during the months of January 2018 through April 2019 will see a one-time bill credit on their electric service bill issued between July 25, 2019 and August 26, 2019. This refund is associated with the Tax Cuts and Jobs Act of 2017 passed into law in late December 2017.
On June 13, 2018, Montana-Dakota filed an application with the Wyoming Public Service Commission (Commission) to update the Company’s electric rates in response to the passage of the Tax Cuts and Jobs Act of 2017 and the Commission’s Order Requiring Montana-Dakota to File its Tax Assessment Plan and Create a Deferred Regulatory Liability Account issued on December 29, 2017. On April 8, 2019, the Commission authorized an overall decrease in the Company’s electric service rates to be effective May 1, 2019 and a Tax Cuts and Jobs Act Refund for customers who were billed for electric service January 2018 through April 2019 to be applied to customers’ accounts no later than August 1, 2019. The bill credit includes interest at the Commission approved interest rate. New Tax Cuts and Jobs Act Refund for Wyoming Customers for January 2018 through April 2019 Electric Service Electric service rates were implemented May 1, 2019.
The electric rate refund plan approved by the Commission provides for the refunding of $1,614,096 to Wyoming electric service customers through a one-time bill credit on their electric bill to be applied by August 1, 2019. Each customer’s refund is based on their January 2018 through April 2019 consumption.
The bill credit is shown as a separate line item in the Account Summary section of your bill and will be identified as “Tax Cuts and Jobs Act Refund”.
Rocky Mountain Power: As noted in this April 17, 2019 Wyoming Public Service Commission document:
On May 16, 2018, the Company submitted an application proposing a new Tariff Schedule 197, 2017 Federal Tax Act Adjustment, to return the benefits of the 2017 Tax Cuts and Jobs Act to customers in Docket No. 20000-536-ER-18. The Company included, as part of its 3 application, a stipulated settlement agreement (“Stipulation”) between Rocky Mountain Power and the Wyoming Industrial Energy Consumers (“WIEC”) and a request to (1) reduce customer rates by $22.5 million; and (2) offset the 2018 Energy Cost Adjustment Mechanism (“ECAM”) deferral balance, for which the Company sought recovery in Docket No. 20000-535-EA-18 (“2018 ECAM”), by $3.6 million—both with benefits or savings resulting from the 2017 Tax Cuts and Jobs Act.
On March 15, 2019, the Commission issued its Final Order in the docket and approved the part of the Stipulation in which parties agreed to refund $22.5 million of the tax benefits to customers until the next general rate case using average-of-period rate base calculations and rejected the part of the Stipulation in which parties agreed to use some of the benefits to automatically offset future costs related to the ECAM and Energy Vision 2020 projects. The Commission indicated instead that it would consider them in future, separate applications.
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.