Friday, April 23, 2010

New York's electrical bills: a taxing issue

From the 26 April 2010 Greater Niagara Newspapers

by Bob Confer

It has been well documented in this column that New York’s high electrical costs are a bane to our state’s health. They strip our already-beaten economy of crucial dollars that could be used to advance our businesses or improve our quality of life. Many companies that compete across state borders (such as mine) find themselves paying twice what their competitors from neighboring states are. Homeowners face similar problems with their power bills, forking-over $708 more per year than the average American.

It’s frustrating, and it always comes back to one simple question: “Why”?

The answer is just as simple. There are countless reasons for the higher costs in our utilities and the biggest, by far, is the usual one: Taxes.

This issue was expertly analyzed by the Public Policy Institute of New York State (PPI) in a white paper issued last month. The report, entitled “Short-Circuiting New York’s Recovery”, noted that energy companies and their customers in New York pay a staggering $6.367 billion for state and local taxes and assessments.

That assortment of fees is led by property taxes which collected $3.1 billion from energy producers and providers. It’s a burden rather unique to the Empire State as made evident by the collections of our West Coast doppelganger. When people think “bad government” California is right there at the top of the list with us. You would think that their property tax receipts would be eerily similar to ours. Not so. Theirs totaled only $786 million, a quarter of ours. Of course, the second and third largest individual taxpayers in New York State are power transmission and delivery firms.

The PPI found that other local taxes were as unusually painful. The state does not collect sales and use taxes on electricity, but that doesn’t prevent local municipalities and other government entities from imposing them on consumers. These fees amounted to $822 million last year. School districts are guilty of indulging in this practice and the report identified the Lackawanna district as one of the abusers, imposing a 7.75 percent sales tax on energy.

Another gigantic sponge is the gross receipts tax that attacks revenues and is collected by the State (2 percent on residential distribution only) and local governments (ranging from 1 percent in towns and villages up to 3 percent in the city of Buffalo). The various GRTs rake-in $654 million per year.

Last but not least, there were the numerous alternative energy charges which are collected from four different line items. Among them is the systems benefit charge that was exposed by this column in February. These various fees supposedly support the development of alternative energy (solar, wind, etc.) and subsidize private and public investments in energy-efficient lighting, motors and more. According to the study, that vast transfer of wealth amounted to $569 million.

There were many more relatively-smaller taxes noted by the PPI. But, as you can see, it’s pretty obvious the government will purloin money from anyplace it can and with some rather clandestine practices. It’s a sneaky – and dirty- way to run a government. Unfortunately, for as long as there have been corporate taxes and fees in the United States, people have been duped into going along with them. Elected officials always say that these fees and taxes are collected from “the evil corporations”. They fail to take it one step further and tell you that in order to pay their property taxes, green energy charges and the like, the power companies will maintain their profit through the only means possible: By passing the taxes onto us. We’re paying them one way or another.

So, what does this mean to New Yorkers? According to the PPI, 28.6 percent of our electrical bills are comprised of taxes. That equates to $614 per household, something quite close to the $708 over-payment mentioned earlier, the balance of which is comprised of other state-induced market factors.

Can it get any worse? Yes, it can…and it is. Due to new and bigger taxes, total tax receipts on electricity in New York grew by 15% in 2009 alone. And, that explosion occurred during the Great Recession when electrical consumption dropped significantly in both homes and businesses.

What can be done? I don’t know. Politicians aren’t stupid. They know what makes our electricity so expensive. Yet, they continue to choose that path of higher taxes. If you or I were as smart as they, we might just choose the path of lower taxes and set-up shop or buy a house in the Ohios and Tennessees of the world. God knows millions did before us.

1 comment:

Anonymous said...

I Agree !!!!

also the progressive environmental regulations along with high taxes have created a burdensome regluatory atmosphere for all businesses in NY state.