Residents should ‘no longer passively accept any bogus’ utility taxes

1/5/2018, 6:44 p.m.

Re “Tax law change to affect city utility customers,” Free Press Dec. 28-30 edition:

Many thanks to Free Press staff writer Jeremy M. Lazarus for breaking the story that the new tax law change should reduce the federal income tax surcharge on city water and gas bills.

As first reported in the Free Press, the city currently charges the maximum corporate federal income tax rate of 34 percent on the water and gas bills and does not remit this tax to the feds but deposits million of dollars annually into the city’s general fund. This reprehensible tax now must be reduced to 21 percent, effective Jan. 1, 2018, in accordance with the lowered maximum federal corporate tax rate.

The city’s unseemly federal income tax surcharge on the water and gas bills is, of course, a bogus tax. The city charter allows the city utility to charge customers a payment in lieu of taxes, or PILOT, that a business would pay the locality if the utility was privately owned.

But no private business pays federal income tax to the city, and, as pointed out in the Free Press article, no other locality in Virginia charges a federal income tax PILOT surcharge on the water and sewer bill.

Quite perversely, the counties are not charged the payment in lieu of federal income tax, and the utility sells more water to the surrounding counties than to city residents. It is left to city residents to pay the federal income tax PILOT charge on the more affluent counties’ water purchase.

It will remain to be seen how quickly the Richmond Department of Public Utilities adjusts its rates. Any charges over the new maximum federal income tax rate of 21 percent will not be legal beginning Jan. 1. Already, DPU officials are scrambling to ascribe a portion of the existing 34 percent federal income tax surcharge to a state tax levy, but Virginia Code §58.1-300 prohibits any city from imposing any tax or levy upon incomes.

City residents should wake up and no longer passively accept any bogus and unconscionable federal income tax surcharge on our utility bills. This is certainly the most regressive means of funding the city since even impoverished families must pay higher gas and water bills.