Opinion

David Cay Johnston

You’re paying taxes, so why aren’t energy companies?

By David Cay Johnston
November 8, 2011

By David Cay Johnston

The views expressed are his own.

In a competitive market, economists argue endlessly about who bears the burden of corporate income tax. Is it owners, who get a smaller net return? Or workers, who make less? Or suppliers, who get lower prices? Or customers, who pay higher prices?

In one sector of the U.S. economy, however, the answer is clear-cut. Corporate-owned utilities (mostly electric and natural gas) and pipeline partnerships, all of them legal monopolies, pass their income tax burdens on to customers.

Now a study, released last week, provides powerful new evidence that these two industries convert corporate income taxes from a burden to a benefit.

The study was prepared by Citizens for Tax Justice and the Institute on Taxation and Economic Policy. Both are foundation-backed nonprofits that say the tax system favors the rich and corporations over most Americans.

Utilities charge prices, known as rates, set by political appointees who regulate the industry. Embedded in those rates are generous sums to cover corporate income and all other taxes. Pacific Gas & Electric, the northern California utility, was awarded $431 million to pay 2007 corporate income taxes, a final decision by the California Public Utilities Commission shows. Similar amounts were approved, or are in the process of final approval, for each subsequent year.

But in the three years from 2008 through 2010, PG&E’s corporate parent did not pay roughly $1.7 billion in federal income taxes on $4.8 billion of profits, the expected sum based on the federal 35 percent corporate income tax rate. Instead, PG&E collected more than $1 billion in refunds, thanks in good part to a 2008 increase in accelerated depreciation, which lets companies defer taxes into the future, the study showed.

Brian Hertzog, PG&E’s Washington director of corporate relations, said that the rules that let the company defer paying taxes into the future mean it can use that money immediately to help pay for new plant and equipment. He said this costs much less than borrowing in the markets and thus benefits customers.

Hertzog has a point. When customers pay their monthly bills they loan money to PG&E at zero interest, which is a lot cheaper than borrowing in the markets.  But that is neither capitalism nor market economics.

The market chooses to invest and sets a price for credit. The regulatory and tax systems force captive customers to make interest-free loans to utilities, denying the customers the use of their money for other purposes, including paying down their own debt, which may be at much higher interest rates than the savings from using that money to finance utility projects.

Forcing captive customers to extend interest-free credit to utilities strikes me as a subtle form of legalized theft.

PG&E’s roughly $2.7 billion swing from burden to benefit is not unique. The 26 large utilities studied paid an average rate of just 3.7 percent over the three years, a 10th of the 35 percent statutory U.S. tax rate. Half of the 26 corporate-owned utilities analyzed got money back from the government, thanks to deferrals and tax benefits from tax shelters in non-utility operations. Just four paid corporate income tax of more than 10 percent.

The trophy for turning the burden of taxes into a benefit goes not to General Electric, whose skillful use of tax law and lobbying for tax breaks is famous, but to Pepco Holdings, which owns the monopoly electric utility in and around the U.S. capital. Pepco’s three-year tax rate? Minus 57.6 percent. GE’s was only minus 45.3 percent.  Pepco says it pays all of its taxes as required by law. For sure that’s true.

Here’s the irony. Pepco’s biggest customer, by far, is the federal government. So, federal taxpayers and other customers paid electric rates to Pepco that assumed about $309 million in corporate tax payments would flow to the Treasury, only to see $508 million of their taxes flow to Pepco as refunds. Ouch.

The roughly $817 million tax benefit Pepco enjoyed — from taxes it collected but did not turn over combined with refunds — almost equaled the $882 million in profits Pepco’s corporate parent reported during the same period.

This is an old story at Pepco Holdings. In the six years preceding the study, 2002 through 2007, Pepco Holdings reported pretax profits of $949.2 million. Its cash paid for taxes was negative $116.4 million, my analysis shows. Cash paid for income taxes is a simpler measure than the painstakingly detailed examination in the Citizens for Tax Justice study. Cash paid also tends to understate reality.

Pipelines have an even juicier deal. Under the 1986 Tax Reform Act they are exempt from paying corporate income taxes if organized as partnerships. However, under a rule from the era of President George W. Bush, federal regulators let them collect the corporate income tax anyway. That IS legalized theft.

How do utilities and pipelines convert the burden of corporate income taxes into a benefit, whether temporary or permanent? Easy as 1, 2, 3.

  1. Political appointees on regulatory boards, many of whom come from and return to the utility and pipeline industries, require customers to pay the utilities’ corporate income taxes measured as if the utilities were stand-alone companies filing their own tax returns.
  2. Most utilities do not stand alone, but are subsidiaries of holding companies.
  3. Each holding company files a tax return that consolidates its utility and non-utility businesses, allowing it to capture some of the utility taxes as additional assets or as profits.

The result is little or none of the tax that customers are forced to pay actually gets to government.

Here are two questions to ask about this costly state of affairs: Why have you not heard about this from anti-tax politicians and organizations that insist they are trying to ease your burdens? Who will put an end to this forced transfer of wealth from utility and pipeline customers to the companies’ shareholders?

 

Comments
86 comments so far | RSS Comments RSS

They create jobs, din’tcha know?
*snicker*
OWS-We are the 99%!

Posted by dXm | Report as abusive
 

Income taxes paid by corporations are only a shell game to hide how much you the consumer are paying in taxes. Companies don’t pay taxes, they pay expenses (which a tax is to them). This is passed on to the consumer in higher fees for their goods and services. The only good thing this does is to collect taxes from foreign customers. However, it also makes US goods more expensive. If we really want companies out of the government we should eliminate all corporate taxes. Then there would not be the incentive to lobby for tax breaks. However, it would place more burden on the regular tax payer because they would have to directly fund government spending.

Posted by TheCommenter | Report as abusive
 

I could understand if the oil companies pay $0 in taxes. Oil is an important commodity in the world, and increasing its cost would mean increasing cost of everything else.

However, giving the oil companies $$? That is rubbish! Why should they take my dime? Have they lowered gas prices for me?

What I am saying is that it is okay for them to earn their dollar and keep it, not take an additional 10 cents from me.

Posted by PreetSG | Report as abusive
 

Taxes on profits made from either regulated or “free” market products and services should be paid by the producers – they will *almost always* pass on this as a cost to consumers. In an open market a company might absorb some of the costs to remain competitive but with utilities the producers are monopolies so there’s no doubt they will pass on the cost in their rates.

That’s why there are regulators who discuss how much the rate charged is allowed to include taxes (consumption or sales taxes are over and above these producer oriented taxes and paid be the “final” consumer). If after all that things are just too expensive well there’s a bigger problem than just the accounting and taxes. Investment in more efficient production (accelerated depreciation etc) or consumption (energy saving technologies) seems the only approach to lowering costs. Better to incentivize electricity producers and users (while subsidizing an income geared tax rebate for consumers up to a certain level so they can heat their houses etc) than burying the hoped for solution in corporate conglomerate account statements. If the tax expenditure is just going to happen anyway but through a paper trail inside a conglomerate’s legal and accounting divisions, then policy makers should at least make the producers do something for it like efficiently produce more wattage per dollar input.

Posted by WarnerTiempo | Report as abusive
 

This is a complicated area, mainly because a regulatory framework is always going to be necessarily hypothetical.

This article makes one fundamental mistake though. Consumers are NOT loaning money to the utilities at zero interest. Rather they are paying less tax in the future as a proxy for interest on their money today.

The two tax approaches (tax payable, or tax on hypothetical profits, and deferred tax) should be NPV neutral. The firms prefer the latter approach because it ‘front loads’ tax, but consumers are no better or worse off under either approach.

Posted by JJHG | Report as abusive
 

I know it is a shock for the economic illiterates posting here — most of whom seem to be rabid socialists – but ALL businesses factor in “taxation” as part of the retail cost of their product.

The only real monopoly here is a GOVERNMENT MONOPOLY. It’s called the INLAND REVENUE SERVICE.

Get it? Death and taxes?

Who can one blame for such basic ignorance? How about starting with the author of this piece?

Of course, when we come to the Green Energy SCAM — things are INVERTED.

For instance, despite half a billion from TAX PAYERS, these scam artists st Solyndra (Green Is Tax People) still went bust.

Posted by Bill_Hickman | Report as abusive
 

I don’t think that corporate taxes our in the best interest of our economy but corporations receiving subsidies is just atrocious.

Posted by jasonjalves | Report as abusive
 

Good grief, people!

Corporate taxes are expenses of doing business. Any tax paid this year for last year comes off this year’s gross income before net income is even figured.

But this particular scheme, where consumers are separately billed taxes and then the company pockets those payments tells me the politicians allowing this to continue DO NOT represent MY interests. Same thing AGAIN when they do nothing to halt such a process.

At some point political graft, incompetence or stupidity needs to have jail time at risk to stop it once and for all.

Posted by OneOfTheSheep | Report as abusive
 

TALK ABOUT SHOOTING YOUR SELF IN THE FOOT?

Oh that’s it raise taxes on the Big Energy Companies!
You fool they don’t pay taxes as they just pass it on to
the consumer and last time I checked that’s US!

Mindless fools tax those big corporations, again they just pass it on to the consumer!
We all ready have the 2nd highest Corp Tax rate in the world, our Economy is in the tank and these Democrat fools want to raise the Corp Taxes even Higher?

Ask any Economist you don’t raise taxes in the Middle of a recession or a depression!

Posted by FLOYDINFLORIDA | Report as abusive
 

Thanks to the author for this startling new discovery, however, this is a pittance when compared to state and federal taxes collected on each gallon of gas sold. That number is in excess of $80 Billion annually.

Posted by Boyle | Report as abusive
 

So change the accounting laws!! But don’t villify if they broke no laws!! Yes, our 65,000 page tax code is a joke, 50,000+ IRS agents is a joke and the Flat/fair tax model is looking lkike a really honest and reasonable appoach about now! If they broke the law, make pay 3x, plus all cost to prosecute-no brainer!

Posted by DrJJJJ | Report as abusive
 

I’ve long assumed that we had all agreed that no one would ever mention this.

You mean… it’s ok to complain, but no one realized ’til now?!

Posted by moneywon | Report as abusive
 

Great article! There are other companies/banks/millionaires that could help the US economy as well. When this country brags on the high numbers of millionaires, there should be no excuse for the media to report “poor US economy”. There should be NO “bail-outs” for any company. US products manufactured outside our borders should pay the same tariff amounts like all business imports.

Posted by txpayer | Report as abusive
 

So, I pay taxes on the energy I use for my home every time I pay my utility bill to cover the taxes the Energy Company is paying.

The Energy Company puts it in their bank.

At tax time, they don’t just owe “zero” tax, they are entitled to millions in “welfare” rebates.

And my tax dollars go to pay those millions.

I’m sick of this sh*t.

Posted by JL4 | Report as abusive
 

” Any change from these prices typically reduces earnings, increasing prices reduces market share and decreasing prices reduces margin and therefore earnings. In todays market price increases are an extremely risky strategy for most any business, just ask BOA.”

An interesting position. It clearly comes from someone that understands microeconomics, but misses the big picture of macroeconomics. Yes it is risky in todays market for one company to raise prices, But what happens when every company in the sector is hit with increased prices. Lets assume the market sector uses a lot of crude oil like the refining industry. When the price of their raw material, crude oil, goes up by 20 percent, every refiner can easily increase the price of gasoline to cover the addition cost. Consumers have seen that time and time again over the years.

Is the imposition of a tax on an industry any different. The tax must be paid by all players. This allows them to raise their prices to cover the tax just as easily as the refiners can pass along the higher cost of crude oil.

In fact, no matter how a tax is levied on a company, the company never pays it. Other posters have noted, the company passes it along as either lower payments to suppliers, lower payments to employees, lower returns on investments, or higher prices for products. In my experience they try the price increase first.

This article shows how some companies have found/created ways to go even further. They are in effect using the tax system as a way to gain corporate welfare from the tax payer. Many have noted the system corporations use to determine prices, wages, costs, and other parameters of business is complicated. Couple this with the extremely complicated tax structure needed initially to cope with this problem and later to make the problem worse, and it is unlikely we as a society will ever solve the problem of fair income tax application. This was the intended purpose when the Income tax was devised. It would be collected from people before they receive the money so they would never realize how much their government was costing. Don’t believe me. Ask almost anyone how much income tax they paid last year. The usual answer is a few hundred dollars or “I did not pay any, I got some back.” This charade has gone on too long.

The solution would be to create a taxation system that is above board, open and measures something that everyone can see. That way every one can tell how much tax they are paying and will begin to understand what government cost. There is a proposal on the table to tax expenditure at the citizen level with rebates to everyone that effectively eliminate any taxes for those below the poverty income level. The tax would be easy to understand and collect because it would show as a percentage on every sales receipt. There would be no “hidden loopholes” because any attempt to game the system would show up on every sales receipt in the nation. It is called the Fair Tax and would go a long way to clean up all this back door corporate welfare, because there would be no complicated formula for committees to manipulate. If the sale was to the final customer the tax must be paid. If a refiner purchased a barrel of crude oil, there would be no tax because that is not the final sale. If they purchased an oil storage tank, they must pay the tax, because they are the final purchaser. Many states already have these taxes in place so they would be the logical group to handle the collection. As a side note, this would eliminate the future creation of unfunded mandates on the States. If a state felt they were being held hostage by the federal government, they could just deduct their fair share from from the collected revenue stream. Since the federal government is supposed to answer to the States and to the citizens this seem only fair. It puts the power of the purse strings where it belongs, in the hand of the States. Further, citizens could avoid the tax completely on any money they saved. This would increase savings, reduce retirement defaults and make this country more fiscally responsible because people would save and invest for themselves and since there is no tax on investment income, there would be a massive influx of capitol looking to create new jobs and new opportunities.

If this has made you curious, that a look into the Fair Tax. It would clean up a lot of our problems, reduce graft and corruption and begin to collect taxes on the underground economy in this county.

Check out http://www.fairtax.org for the details.

Posted by AphotoWizard | Report as abusive
 

This is a good column, but many readers don’t understand what this refers to.

This does NOT refer to the big oil companies Obama likes to bash. They are not utilities, they are C corporations, and they pay a ton of corporate tax.

Exxon and the like are not benefiting from these strategies.

This is a regulated utility and pipeline problem.

Posted by bm124 | Report as abusive
 

Confusing headline. The article is about UTILITIES, not energy companies. That’s a separate scam.

David, it would clear up some haziness in the story if you explained what “refunds” these are that part of the calculus. What was paid and then refunded? If the amounts were pre-paid taxes, like the employed pay in withholding or the self-employed pay in estimated tax, then the refunds are not 100% gov’t giveaways that create a negative tax rate, as the article implies, but just indicates that utilities pay little to no taxes.

Repeat: where did the “refund” $ come from? And if the $ originally was estimated tax, what did these utilities actually pay – because if they overpaid estimated tax, and received large refunds, they still may have paid something in taxes.

For the simple-minded right-wingers, this question does not necessarily invalidate the main argument in the article, that ratepayers are sending utilities $ to pay taxes with their monthly bills, and the utilities aren’t paying those taxes. That angle is as rotten as anything in the rest of the tax-scam subsystem of corporate welfare.

Posted by RogerT | Report as abusive
 

Per my previous question, I missed the paragraph that says the utilities actually paid an average 3.7% in income taxes over the 3 years of the study.

So, how does that translate into the negative tax rates in the graph? They paid taxes, a tiny bit, sure, effectively a criminal rate, nothing compared to the rates normal people pay — BUT that is NOT a negative rate. Apparently the math is based somehow on the 35% corporate rate as a baseline – but again, how is that a negative rate in absolute terms, when the actual rate is the 3.7% quoted?

And, what % are ratepayers paying to offset the corporate income taxes of the utilities? Compare that to the 3.7% actual tax rate, and you’ve got the magnitude of the legalized theft. That figure would be very enlightening; the negative numbers in the graph, perhaps not so much.

Posted by RogerT | Report as abusive
 

Because only the poor are suppose to pay taxes. Did no one get the memo back in 1980?

Why do you think we have Republicans for and their mental followers.

Posted by Kiljoy616 | Report as abusive
 

Why aren’t any companies? “Good” ones get a kick-back:

EXXON MOBIL: The oil giant that was the world’s most profitable corporation in 2008 has spent $5.7 million in campaign contributions over the last ten years and $138 million in lobbying expenditures. Its federal corporate income tax liabilities for 2009? Absolutely nothing. Not only did it pay nothing, but it also received a tax rebate the same year of $156 million.

CHEVRON: Chevron spent $4.4 million in campaign contributions and $91 million in lobbying expenditures over the last decade. It received a tax refund of $19 million in 2009 while making $10 billion in profits and $324 million in government contracts in 2008.

CONOCOPHILLIPS: The Texas-based gasoline giant spent $2.5 million in campaign contributions and $63 million in lobbying expenditures over the last decade. It received “$451 million through the oil and gas manufacturing deduction,” a special tax break, between 2007 and 2009, despite $16 billion in profits over the same period of time.
VALERO ENERGY: Valero spent $4.1 million in campaign contributions and $4.8 million in lobbying expenditures from 2001 to 2010. It received a $157 million tax rebate in 2009 despite $68 billion in sales during the same year. It received “$134 million through the oil and gas manufacturing deduction” over the last three years.

BANK OF AMERICA: Bank of America employees contributed $11 million to federal political campaigns from 2001 to 2010 and spent $24 million lobbying over the same period of time. It made $4.4 billion in profits in 2010 while receiving a tax refund of $1.9 billion.
CITIGROUP: Citigroup employees contributed $15 million to federal political campaigns from 2001 to 2010 and spent $62 million lobbying over the same period of time. It made $4 billion in profits in 2010 while paying absolutely nothing in federal corporate income taxes. It also received a $1.9 billion tax refund.

GOLDMAN SACHS: The mega-bank Goldman Sachs, which is often called “Government Sachs” in insider circles because of its clout over Washington, spent $22 million in campaign contributions and $21 million in lobbying over the last decade. It paid an ultra-low tax rate of 1.1 percent in 2008, while also receiving $800 billion in governmentloans to help weather the financial crisis.

BOEING: The aviation and defense contractor giant gave $10 million in contributions and $115 million in lobbying expenditures over the last decade. It paid a grand total of nothing in federal corporate income taxes in 2010 and received a $124 million tax refund.

FEDEX: FedEx spent $8.7 million in campaign contributions and $71 million in lobbying expenditures from 2001 to 2010. It paid a .0005 percent effective tax rate recently, actually spending 42 times as much on lobbying Congress as it did paying taxes. To do this it utilizes 21 tax havens.

CARNIVAL: The cruise line paid $1.7 million in campaign contributions and $1.6 million in lobbying over the past ten years. Despite the relatively low amount of money it spent influencing Washington, it has gotten away with a super-low tax rate. Over the past five years, its federal corporate income tax rate has been an effective 1.1 percent.

VERIZON: Verizon spent $12 million in campaign contributions and $131 million in lobbying expenditures over the past decade. It paid absolutely nothing in federal corporate income taxes over the past two years and $488 million in government contracts in 2008; in 2010, it made $12 billion in profits.

GENERAL ELECTRIC: General Electric spent $13 million in campaign contributions and $205 million in lobbying expenditures over the last decade while netting a tax refund of $4.1 billion over the past five years. It made $26 billion in profits over the same time period.

Americans…start your own lobby at the voting booth in 2012 and vote all incumbents out of office.

Posted by Onerioi | Report as abusive
 

Rubbish.

Paying employees (ect) is a cost and a deduction.

To raise fees is to increase profit and so increase the tax bases.

To pass “income tax” down to the consumer by way of fees is a circular logic fail.

Posted by torakism | Report as abusive
 

Why don’t we just make energy resources national, owned by the people, then we pay fair market value for them without a plethora of investors, executives and CEO’s getting their cut along the way?

Did you know gasoline prices at the pump are lowest among nations that have government run oil, and highest among nations that have privatized oil industry?

Posted by JohnSmith9875 | Report as abusive
 

Whether or not the negative tax payments are justified, legitimate or serve a public interest, why are the energy companies themselves satisfied with the wide discrepancy that exists as shown on the graph? The author doesn’t seem to explain that discrepancy either.

It seems to me that if lobbying gets tax breaks, it’s crooked. No individual can lobby the IRS for a better deal on taxes. As far as I know, no individual can lobby Congress either.

Posted by paintcan | Report as abusive
 

Quite simply, businesses don’t pay taxes their customers do. Taxes are a cost of doing business that is passed on to the customer.
Economics and Finance 101.

Posted by busterfrogg | Report as abusive
 

Way back in the 1950s personal income taxes were at about 8%, when the government raises taxes people go to their employer for a raise(cost of living increase). So in reality it is the employer that pays any new taxes charged to the individual. Income taxes are now around 40%, the employer has absorbed this cost not the individual. If you want corporations to start paying taxes again, remove the 40% we pay through our employees.

Posted by Deus_Ex | Report as abusive
 

Corporations are people and as such, are subject to personal income taxes.

Posted by GreenMarine | Report as abusive
 

RE: “Corporations are people and as such, are subject to personal income taxes.”

Exactly, I own 1/1,000,000,000 in XOM (Exxon-Mobile) and thus pay that my portion of their income taxes. In addition they pay income taxes to the ones I pay; we are taxes twice on the same transaction.

Posted by SirGareth | Report as abusive
 

Executives should not make multimillion dollar salaries. Just because somebody manages a huge portfolio doesn’t mean they deserve a chunk of it.

Congress handles a 3.7 trillion dollar budget, it doesn’t mean they deserve a 10 million dollar salary.

Posted by RickCain | Report as abusive
 

Sigh. Income taxes are some of the smallest of “taxes” paid by energy companies – the main “tax” is the royalties they pay – often 15-30% of every bbl is collected in royalties. Simply because these taxes are called royalties doesn’t change the fact that energy companies pay significant amount of taxes – if it walks, talks and sounds like a duck…

Posted by OracleOfMumbai | Report as abusive
 

Because they paid legislators to write tax policy favorable to them.

Posted by Karnac | Report as abusive
 

Taxation of corporations is a method of government to hide the full weight of taxation from the true payer of taxes -the individual.

Eliminate taxation of corporations and smaller businesses and raise it on the individual, or eliminate taxation of the individual and raise it on corporations and smaller businesses. To tax both is a dishonest policy.

Posted by sanbornl | Report as abusive
 

Exxon-Mobile alone, as a single corporation, paid total taxes in 2009, equal to half of all the income taxes recieved by the federal government. This has been true 9 of the last 10 years. This doesn’t even include royalties. To recieve a return without paying any income tax, one has to qualify for tax credits. Credits are given for certain activities government wants to incentivise, that would not occur otherwise, or that they want to occur quickly for various reasons. Public corporations are not suppose to pay income taxes, their stock holders do on capitol gains and distributions. This federal income is HUGE. The only reason there even is a corporate income tax, is that if it didn’t exist, money could be kept by the corporation tax free as a shelter for shareholders.

Anything that increases expenses for any company, ends up added to the cost of the product. This is right and just.

With a handful of exceptions, all of the stockholders of Exxon-Mobile are the so called “99 percent”. This includes any of you with a retirement fund.

No matter how it’s invested, virtually any decent portfolio, even if you’re just in target date or other mutual funds, includes XOM, other big oil corporations, utilities, tobacco, beer, treasuries, and bonds, including real-estate with subprime exposure thanks to Clinton and the Democrats. It is necessary to protect against economic bubbles, recessions, and even prosperity, since some assets decline during such times.

This means that the so called 99 percent, as a group, are the majority owners you’re griping about, including yourself. If you’re too young to have such accounts, (or trust funds), Then your parents do. In case you didn’t know, they get to vote as stockholders as well, so blame the 99 percent if you don’t like it, and that’s you.

Posted by libsrnazi | Report as abusive
 

You’re paying too much for that good or service you want, and you should be angry because we use NAZI propaganda class warfare retoric, (just replace the terms “corporations” and “jews”), and it is indiscernable.

Because you’re now ticked off, you should let us tax and regulate that corporation, that’ll teach them, and will be more “fair”. And that will result in lower prices…

Wait… That doesn’t make sense… Well then, Big oil is making too much profit, and you’re hurting because gas and heationg oil is too high, so we gripe about big oil profits to tick you off, and justify windfall profit taxes on just US oil companies, even though they have no control over the price of oil. That’ll teach em’ a lesson. Then the price of gas and heating oil will go down… Wait, no… I’m confused…

Or maybe people who buy into that crap are mindless puppets to a beaurcracy called the Democratic Party. Who is not only telling you how to think, but how to feel (most of all), what to say, and how badly you’ll be castigated as ignorant, stupid, racist, homophobic, sexist, and dismissable, if you even consider or question any deviation from this political party line.

Posted by libsrnazi | Report as abusive
 

“We ask that the government undertake the obligation above all of providing citizens with adequate opportunity for employment and earning a living. The activities of the individual must not be allowed to clash with the interests of the community, but must take place within its confines and be for the good of all. Therefore, we demand: … an end to the power of the financial interests. We demand profit sharing in big business. We demand a broad extension of care for the aged. We demand … the greatest possible consideration of small business in the purchases of national, state, and municipal governments. In order to make possible to every capable and industrious [citizen] the attainment of higher education and thus the achievement of a post of leadership, the government must provide an all-around enlargement of our entire system of public education … We demand the education at government expense of gifted children of poor parents … The government must undertake the improvement of public health – by protecting mother and child, by prohibiting child labor … by the greatest possible support for all clubs concerned with the physical education of youth. We combat the … materialistic spirit within and without us, and are convinced that a permanent recovery of our people can only proceed from within on the foundation of the common good before the individual good.”
– From the political program of the Nazi Party, adopted in Munich, February 24, 1920

Posted by libsrnazi | Report as abusive
 

The problem here is that in addition to what was mentioned
in this good article is that governments support these corporate entities to the hilt because they are an excellent source for fleecing the average person with myriads of fees and taxes that they can collect. Please see your utility bills and cell phone bills. It’s a lot easier to collect these funds from the average joe than from corporate entities. I also agree that it is horrendous to give these utility companies all the extra financial help which they truly DO NOT DESERVE.

Posted by loiters21 | Report as abusive
 

Columnist here….

@libsrnazi, the total revenues of Exxon Mobil do not even equal half of the federal income tax receipts (they run about a third as much) so your comment that the company’s taxes were equal to half of individual income taxes in nine of the last ten years is nonsense.

Others here seem to not have missed that this column dealt with legal monopolies, not competitive corporations, even though that is the opening of the column.

Monopolies UNIQUELY get to pass all costs on to customers; in a competitive market not all costs get passed on to customers and the cost of taxes, as the column notes at the start, can fall on any of four sectors: owners, workers, vendors or customers or some combination.

If a corporation can automatically pass on all of its tax costs then it is NOT in a competitive market.

Furthermore, if all companies in an industry, a competitive industry, can just pass on tax costs then why would they care so much about corporate income taxes?

@JJHG, what you describe as an error is in countless documents, including testimony, in monopoly rate cases I have been covering going back four decades.

And your math is wrong because of inflation (though if we get into a long running deflation that would change).

If I pay $1 today in my electric bill to cover the corporate utility’s income taxes and it pays that $1 over to government in 30 years the inflation adjusted value of that dollar will be less than half its instant value. Deferred taxes are not adjusted for inflation. Thus, deferrals amount to a gain to the company deferring and a loss to the consumer paying the utility and that is before getting into government borrowing against anticipated future revenues, which can make the deferral into a negative for government as borrowing costs will be higher than inflation.

Deferrals are generally treated these days as zero interest capital, but authorized rates of return have been raised so high — I have read decisions that grant utilities 18% pretax returns and in other columns shown 55% returns — that the zero interest point is weak.

As my column notes, customers generally pay higher interest rates on their debt than utilities do, so the forced loan to utilities of deferred tax dollars makes consumers worse off.

Posted by DavidCayJ | Report as abusive
 

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