With all the talk about increasing corporate taxes rates in the news, it’s important to remember that corporate tax rates affect every level of the economy. This is because taxes have spillover effects— companies pass extra costs on to their customers.
A good example is electricity bills in Missouri. From 2008 to 2017, the average retail electric bill in Missouri rose 29 percent—the second-biggest increase in the country over that time period. After the Tax Cuts and Jobs Act (TJCA) lowered corporate tax rates from 35 to 21 percent, Missouri utilities reduced electric rates for customers. And it wasn’t just a coincidence; Missouri’s utilities specifically stated that the reason for the rate decreases was the corporate tax cuts.
For the past decade, electric rate increases for three of the four investor-owned utilities in Missouri have far outpaced average salary increases and general inflation. This means that a larger percentage of Missourians’ budgets are being dedicated to paying electric bills, with less being left over for other needs. However, that finally changed between 2018 and 2019 (2018 was the first full year of TJCA implementation) when electricity rates fell by 6 percent—customers of Missouri’s four investor-owned utilities saw cumulative savings of $159 million in 2018 alone.
In sum, just because you may not run a corporation doesn’t mean what happens to corporate tax rates doesn’t affect you. If a decrease in corporate tax rates meant an electric rate decrease for Missourians, it’s fair to believe a corporate tax rate increase would result in electric rate increases. And, as the last decade has shown, that’s an expensive proposition for all Missourians.
