Corporate Tax

Biden’s proposed corporate tax hike has the potential for costlier utility payments

Residents of President Biden’s home state of Delaware – which he represented in the Senate for more than three decades – saw their utility bills drop by $ 15 in 2018, replacing the expected $ 65 increase.

The reason was the Tax Cut and Jobs Act, according to the Delaware Public Service Commission when it announced Delmarva’s rate cut. The tax reform package signed by President Trump in late 2017 has, among other things, lowered the corporate tax rate from 35% to 21%.

Delaware is one of 38 states that are passing corporate tax cuts on to customers, according to data compiled by the Americans for tax reform. This includes the current president’s birth state, where the Pennsylvania Public Utility Commission announced in 2018 a monthly credit on customer bills for 17 electricity, natural gas, water and sewer utilities totaling more than $ 320 million.

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Now the Biden government is proposing to raise corporate tax to 28%. That’s still less than before Trump’s tax reform package – but some are scared enough to raise electricity bills.

Investor-owned utility companies, such as electricity, gas, and water companies, are regulated companies and are required by law to have their billing rates approved by state public utility commissions. The commissions must take into account how tax liabilities and other expenses are reflected in operating costs. Utility companies have significantly less flexibility in assuming such costs.

“These taxes are passed on directly to public utility customers,” US tax reform president Grover Norquist told Fox News. “With the public utilities, everyone agreed to the rate of return. … Regulated companies can’t move money.”

Trump’s 2017 corporate tax cut reportedly resulted in more than 100 public utilities across the country returning $ 90 billion to their customers, according to annual SEC 10-K filings. After the tax cut, public service commissions had to make settlements with public utility companies to determine what to do with the excess accumulated deferred income tax (EADIT).

Biden has made repeated promises not to raise taxes for those earning less than $ 400,000 a year. However, because of the way pension rates are set, these corporate tax increases could become an indirect tax on benefit payers.

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White House press secretary Jen Psaki dismissed these concerns when asked about them in April.

“Well, I would say there is no need for this to happen. We have evidence of what is happening, ”said Psaki. “In 2017, when Republicans gave big corporate tax cuts a priority over investing in the workforce, there were many arguments about the impact: the benefits would be passed on to consumers, they would invest in research and development, jobs would be created.” created. None of that happened. … So I would say that’s not a problem we have at the moment. “

The cuts in utility rates that came with the corporate tax cut spanned the country into red, blue, and battlefield states. These included some of the most populous states like Texas, where at least 10 companies cut rates; New Jersey, where 14 utility companies gave it to customers; Virginia, where at least a dozen companies are cutting rates; and nine Ohio companies and six Illinois companies passed the savings on. Residents of smaller states like Utah and Vermont benefited, as did installment payers in both Carolinas, both in Dakotas and in the two early states of Iowa and New Hampshire.

As with any legislation, Biden will have to rely on the support of Democratic Sens. Kyrsten Sinema of Arizona and Joe Manchin of West Virginia.

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In Arizona, at least 10 utilities, including electricity, water, and sewer companies, have cut tax rates or provided refunds in the hundreds of millions due to corporate tax cuts. In West Virginia, at least three companies passed the savings from corporate tariff cuts on to customers. It was the Appalachian Power Company, which allegedly saved $ 235 million; Potomac Edison reportedly saved $ 85 million and the West Virginia American Water Company reportedly saved $ 4.6 million.

“Any increase in the corporate tax rate increases the bills you pay, especially with publicly regulated companies,” Norquist said. “This will affect public utilities in all 50 states.”

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