Press Release

Proposed tax hurts consumers, helps environmental groups

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RALEIGH – North Carolina electricity customers could pay an extra $181 million a year, thanks to the efforts of a consumer advocate that’s supposed to represent customers’ interests. That’s according to a new John Locke Foundation Spotlight report.

Click here to view and here to listen to Daren Bakst discussing this Spotlight report.

The N.C. Public Staff wants electricity users to pay a “fee” for a “public benefits fund,” said Daren Bakst, JLF Legal and Regulatory Policy Analyst. “Clearly, this ‘fee’ is a tax,” he said. “In order to receive electricity, consumers would be required to pay an extra charge that has nothing to do with the actual cost of producing electricity.”

The additional fee would be calculated based on the amount of electricity a family or business uses, said Bakst, who wrote the report with JLF research intern Geoffrey Lawrence. “In other words, it is a tax for the ‘sin’ of using electricity,” he said. “The more electricity customers use, the higher the fee.

“The public should know about this proposal,” Bakst added. “But as is the case in other states with similar taxes, the true nature of this ‘fee’ is being hidden from public view.”

The State Energy Office estimates that when applying the national average rate for similar tax schemes used in other states, such a program would cost $181 million annually in North Carolina.

Bakst questions the Public Staff’s support for the plan. “This agency is supposed to represent the interest of consumers before the Utilities Commission,” he said. “A consumer advocate should fight a tax increase. Unfortunately for North Carolinians, the Public Staff is the agency recommending the new sin tax.”

Proponents of the plan have even questioned whether such a tax has to be passed by the state legislature, Bakst said. “Some proponents would like to get around the legislature altogether and simply let the Utilities Commission create this new tax,” he said. “Besides being unethical, such a move would likely be illegal.”

State law requires the Utilities Commission to set rates based on the costs of providing electricity, Bakst said. “There is nothing in the statute that gives the Commission the power to charge a separate tax that falls outside of the rate-making process,” he said. “Even the Public Staff has been forced to recognize there is a legitimate question about whether the Commission has authority to approve the ‘sin’ tax.”

Even if they thought they had the authority, utility commissioners should defer to the legislature on a policy issue of this magnitude, Bakst said. “If North Carolina’s elected lawmakers want to punish people for using electricity and increase their taxes, they should hold an open, public debate on the issue,” he said. “They also should not try to hide the tax with misleading names. Proponents of these sin taxes in other states try to disguise their true nature by giving them innocent-sounding names like ‘non-taxable fixed charge.’

“If the tax supports worthy programs, there should be no need for deception,” Bakst added. “The potential costs and benefits of these programs should be weighed against other taxpayer priorities as part of the state budget process.”

Environmental groups and the Public Staff view electricity use as a problem and will take actions without any regard to the costs consumers will have to incur, Bakst said. “To environmental extremists and other proponents of this extra fee, the use of electricity, which allows us to warm our homes and function in modern society, is a sin and needs to be reduced,” he said. “This horrible sin is the difference between living in the 19th century and the 21st century.”

Daren Bakst and Geoffrey Lawrence’s Spotlight report, “Smokes, Booze … and Electricity? A new sin tax on electricity could be on its way,” is available at the JLF web site. For more information, please contact Bakst at (919) 828-3876 or [email protected]. To arrange an interview, contact Mitch Kokai at (919) 306-8736 or [email protected].

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We are North Carolina’s Most Trusted and Influential Source of Common Sense. The John Locke Foundation was created in 1990 as an independent, nonprofit think tank that would work “for truth, for freedom, and for the future of North Carolina.” The Foundation is named for John Locke (1632-1704), an English philosopher whose writings inspired Thomas Jefferson and the other Founders.

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