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Pepco’s Triple Tax Dip – You Pay

It is tax time and the pencil pushers at Pepco are undoubtedly smiling.

In a matter of weeks, the electric company will transform its federal income tax burden into a multimillion-dollar refund … and you and I will pay for it. Pepco is a leader when it comes to using legal loopholes to pass its tax burden onto its customers.  I call it the “triple dip” and here is how it works.

Pepco charges its estimated income taxes to its customers on our monthly bills. We pay our bills and Pepco keeps the tax money instead of paying federal income taxes. The giant public utility then requests rate hikes based on its estimated “tax burden” to get even more money. Street Authority, a leading financial news publisher, recently named Pepco one of the best utility stocks to buy right now in part because of successful rate hikes.

Because the federal government is Pepco’s biggest customer, the District of Columbia and Maryland residents wind up paying Pepco a third time, when the federal government—using our tax dollars—gives Pepco a huge refund. From 2008 to 2010, Pepco should have paid $309 million in corporate federal income tax based on the amount collected from us through our bills. However, a whopping $508 million went back to Pepco as federal income tax refunds. All of this was pointed out in studies by Citizens for Tax Justice and the Institute on Taxation and Economic Policy. In its latest finding CTJ notes that Pepco would have paid $442 million dollars in taxes on its earnings of $1.263 billion over the last four years if it paid taxes at the corporate rate of 35 percent.

Washington, D.C., has an estimated budget deficit of $172 million. If Pepco and other corporations paid their fair share in taxes, the district would have sufficient revenue. Instead, Mayor Vincent Gray’s 2013 budget cuts $23 million from healthcare coverage to low-income families; Human Services takes a $35 million hit; and hizzoner the mayor aims to raise $30 million in traffic camera fines.

Poor city residents bear the brunt of sacrifice, while Pepco triple dips into our pockets and rakes in millions.


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