One unannounced aspect of President Joe Biden’s tax plan is how corporate income tax increases when … [+]
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Virginia-based Dominion Energy D has been criticized for proposing a 7.7% power increase for its 753,000 South Carolina customers. In Kentucky, Louisville Gas & Electric plans to increase monthly household electricity bills by nearly 12%, and on the west coast, San Diego Gas & Electric is proposing a 3.3% increase in electricity tariffs.
While the fate of these proposed rate hikes and similar measures remains to be seen, all Americans face an imminent threat of an increase in utility costs, urging President Joe Biden, which Congress Democrats can now enact. In contrast to the higher tariffs proposed by San Diego Gas & Electric, Dominion, and Louisville Gas & Electric, President Biden’s proposal would result in interest rate hikes in all 50 states.
In response to the federal corporate tax rate cut from 35% to 21% that resulted from the enactment of the 2017 Tax Cut and Jobs Act, utilities in all 50 states passed their corporate tax savings on to customers in the form of lower utility prices. For example, shortly after the federal tax reform was passed, Dominion announced in January 2018 that it would offer its South Carolina customers an average tax rate cut of 5%, “thanks in part to corporate tax cuts under the new federal tax law in Washington,” CNN reported at the time.
This after-tax utility cost reduction should be aimed at “producing significant and immediate savings … including what we believe to be the largest utility customer refund in history,” said Thomas F. Farrell II, chairman and CEO of Dominion Interest rate cut for 2018 that can now be reversed during the Biden administration.
President Biden proposed raising federal corporate income tax by a third and raising the tax rate from 21% to 28%. If President Biden finds his way and Congress sends him a bill to raise the corporate rate to 28%, it would reduce the competitiveness of US-based companies around the world. This is because when combined with the average government corporate tax rate of 6.03% (according to OECD statistics), Biden’s proposed combined corporate tax rate paid by U.S. employers would exceed 32%, slightly above the current French corporate tax rate of 32% highest corporate rate in industrialized countries and among our key trading partners.
Just as the savings resulting from lowering the corporate tax rate through the Tax Cuts and Jobs Act were passed on to interest payers in the form of lower electricity bills, the increased corporate tax rate now sought by President Biden would be passed on to households across the country in the form of higher electricity bills . This would lead to a regressive tax hike that disproportionately harms low-income households, who can least afford the additional costs.
President Joe Biden has pledged not to impose taxes on households earning less than $ 400,000 a year. However, the higher utility bills that a higher federal corporate rate would bring is just one of many Biden tax proposals that would increase the cost of households making well below $ 400,000 a year. The 33% corporate interest rate hike isn’t even the only proposal from Biden that would increase utility bills nationwide.
President Biden, along with Vice President Kamala Harris and senior administrators like John Kerry and Neera Tanden, has endorsed a carbon tax. The U.S. Chamber of Commerce recently announced that it was open to a carbon tax. Lobbyists for some large corporations acknowledge that they could do relatively well under a national carbon tax, which would give giant corporations an edge over smaller competitors who are less able to bear the additional costs. In addition to inflating electricity bills, a federal carbon tax imposed by President Biden would raise gas prices in the US
Those higher energy bills would be borne by all Americans in the form of higher utility bills and gas prices, adding additional stress to families struggling to make ends meet and those living below the poverty line. The regressive nature of a carbon tax is a key factor that has led to the rejection of numerous carbon tax proposals at the state level over the past decade, including in blue states with democratically-led legislatures that should be most inclined to support a carbon tax.
If recent history is a guide, many on Capitol Hill, even Democrats, will hesitate to support a carbon tax. Even if the carbon tax advocates have not been successful, they still have political implications. For example, recently re-elected Senator Susan Collins (R-Maine), who is known as moderate, ran ads during her successful 2020 campaign and her opponent, former Maine House spokeswoman Sara Gideon (D), about Gideon’s support for the State legislation criticizes levying a carbon tax. This Gideon-backed state carbon tax ultimately failed to pass as it was drawn by the bill sponsor after voters expressed overwhelming opposition in a 2019 committee hearing in which only one person testified in favor of the tax and 60 Maine residents testified against it had.
President Biden, Vice President Harris and their allies on Capitol Hill will set out the goals of their tax hikes as high net worth individuals and large multinational corporations. What the Biden government will not advertise are the higher energy prices that their tax policy would generate intentionally rather than as an unintended consequence.