Public Policy Institute report finds high taxes on electric power an economic drain


Director of Communications

ALBANY— State and local government taxes make up more than a quarter of New York electric bills, according to a new report by the Public Policy Institute, the research affiliate of The Business Council of New York State, Inc. entitled "Short-circuiting New York's Recovery-How Energy Taxes Contribute to High Electric Rates in New York".

New York's power industry paid an estimated $6.367 billion in state and local taxes, assessments and fees in 2009. The figure is $853 million higher than the total the industry paid in 2008. The increase is notable: in 2009 state and local governments in New York raised taxes on electricity by more than 15% -- and did this during the worst economic crisis since the Great Depression.

State and local governments have turned the energy industry in New York into a tax collecting operation leaving rate-payers with ever-growing bills even when energy commodity prices fall. On average, more than one-quarter of customers' electric bills in New York is made up of state and local taxes. Increased taxes and fees have more than made up for the 18 percent drop in wholesale electricity costs since 2000.

“This outrageously high tax burden on electricity is a huge drain on the state's economy,” said Kenneth Adams, president and CEO of The Business Council of New York State, Inc. “This tax burden damages the ability of New York businesses to compete and create jobs.”

New York's out-of-line energy taxes and fees have a particularly deleterious effect on new economy industries in New York, including nano-scale and life sciences firms, and, ironically, alternative energy manufacturing and green tech research companies.

Many innovation economy firms, such as biotechnology firms that need constant air exchanges and strict temperature controls, are extremely energy intensive and thus energy cost-sensitive. They are also the very same firms with the high-paying jobs and positive local economic impacts that other states and nations seek aggressively to attract.

“To make matters worse this year's Executive Budget proposal calls for an increase in the local gross receipts tax (GRT). New York must reverse this trend and lower these taxes to allow our economy to grow,” said Adams. “These taxes drive jobs out of our state.”

“While the state funds some useful programs through energy assessments, we see these ever increasing energy taxes and fees as a symptom of the state's overall fiscal dysfunction,” Adams added. “If efficiency is a significant state priority, efficiency programs should be funded through the budget process with general state revenues, and not by imposing new energy taxes.”

The Business Council has launched an e-advocacy effort opposing the GRT increase at --click on the FIX New York icon.

The report makes four recommendations:

  • The Governor and Legislature should withdraw or reject any new taxes or fees on the energy industry, including the proposed local GRT increase.
  • The 2009 “Section 18-a” increases should be rolled back immediately; at the very least, the March 31, 2014 sunset date should not be extended so that additional resources can be freed up for a combination of infrastructure improvements and rate relief.
  • The off-budget alternative fees, if they must be maintained, should be totally dedicated to developing the alternative energy industry and minimizing greenhouse gas generation. They should not be re-allocated to purposes different from the intent of their original authorization.
  • The State should adopt a property tax cap to provide real property tax relief to all classes of taxpayers, including power generators and utilities. The state's largest non-federal tax burden – real property taxes that totaled more than $46 billion in 2009 -- is also the one that is growing at the fastest rate. Despite a decline in energy demand and usage and thus a drop in industry revenue in 2009, the energy sector paid an additional $180 million in ad valorem taxes compared to the prior year.

The full study is available here.