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Energy Taxes and You

April 14, 2010

Part of NT2’s mission is to focus attention on big picture issues that are being ignored in Albany. One such issue is energy, where it seems that state leaders have a pathological aversion to anything that resembles comprehensive, long-term thinking.

At issue is a move in the State Assembly to repeal the sales tax exemption on utility electricity and delivery services for customers that use independent energy service companies.

This action would result in non-residential customers paying an additional 4 percent in state sales taxes.  All customers, including residential, would likely pay an additional 4 to 6 percent of their bill for local sales taxes.  For some commercial customers, the combined state and local effect translates into an 8 to 11 percent increase.

Context is critical on this matter. The state has been driving businesses and residents out of New York by overtaxing essential services such as light, heat and cooling. In this regard, the Public Policy Institute recently released a report showing that in 2009 state and local taxes cost New York residents and businesses $6.4 billion a year. Such taxes represent 26 percent of the average energy bill.

Last year, state and local government increased energy taxes by another $850 million – or 15 percent – with the largest component of that increase being the seven-fold increase in the PSC Section 18-A assessment, which alone imposed $650 million in new energy costs.

There’s an obvious effect to such taxation. It places a tremendous burden on residents and harms our economy, but that’s not all. Tax levies on energy are making it more difficult for the Public Service Commission to approve rate recovery for infrastructure upgrades. This in turn impacts system reliability and long-term costs.

In this regard, our electric supply grid, our roads and bridges, our water and sewer lines are all the same – if you don’t maintain the assets properly, you have to replace them sooner than necessary and at greater cost.

Letting such maintenance and repair work slide is not good public policy – but no one in state government appears to care.

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2 Comments leave one →
  1. HC Taylor permalink
    April 20, 2010 9:32 PM

    Nice piece. I’d put a sharper point on it. It’s not just the level of taxes that is the main problem — though they are high — it’s what they are spent on. There are a fair pile of studies showing that businesses are willing to pay high taxes if they get the competitive advantages provided by the best infrastructure. Problem is, these energy taxes are not supporting a modern electric grid and economic growth via building new green energy infrastructure, and/or energy efficiency investments. No, not at all. Energy taxes are subsidizing the general fund, which consists mainly of K-12 education, Medicaid, pensions and debt. As you correctly point out, it’s part of the same general problem with transportation infrastructure. You could toss in the Tappan Zee Bridge non-rebuilding as a related example. The bridge tolls were spent on other things, and now there is no money to build a new bridge. It’s part of both cost shifting, in which one part of the economy subsidizes another, and a generational transfer of wealth in which current New Yorkers are paying for the debt and pension obligations of the past.

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