Have you ever taken a good look at your bills? In addition to the goods, service, or utility that you are purchasing, I’m willing to bet there are an array of taxes, fees, and surcharges as well. We are always looking for ways to reduce our bills (goodbye HBO, Game of Thrones season is over), but you can’t always reduce those ‘extra’ costs on your bills. Let’s take a look at the taxes, fees, and surcharges on some of our bills.
Below is our electric bill for the month of August. So this covers a month in a hot and humid DC summer with the air conditioner running pretty much non-stop. I guess I should be happy that the electric company provides such a nice breakdown of the charges.
The first few lines cover the actual generation, transmission, and distribution of electricity to our house. The bottom half of the bill is a series of surcharges and taxes. The ‘Cogeneration PURPA Surchage, EmPower MD Surcharge, and Montgomery County Tax’ total $45.30 which is over 25% of our bill! What are these surcharges and taxes? With some research, this is what I found.
Cogeneration PURPA Surcharge – The power company (Potomac Edison) is required to purchase electricity from AES Warrior Run plant in Cumberland, MD. The electricity provided by the plant costs higher than the wholesale market, so the extra cost is passed onto consumers through this surcharge. The contract started in 2000 and lasts for 30 years! We aren’t going to see this surcharge go away anytime soon
EmPower MD Surcharge – This surcharge covers energy efficiency programs in support of the EmPOWER Maryland initiative that was passed back in 2008. The basic idea is to reduce energy consumption by adopting energy saving measures. The utility companies will provide energy audits, LED light bulbs, Energy Star rebates, etc. to promote energy conservation. Seems a bit silly that I’m paying a surcharge every month so that I can get LED light bulbs for free from the utility company. Well, really – aren’t I prepaying for those LED bulbs in that light anyway? By a lot!
Montgomery County Tax – This one is my favorite. It’s very hard to find information on this tax which is almost 10% of my electric bill. Back in 2010, the county doubled the energy tax to help raise revenue during difficult financial times. The county executive (Ike Leggett) promised to sunset the additional tax at the end of 2012, but then decided to not sunset the tax (a little more background here). Besides the high tax rate, the other thing that irks me is that this has nothing to do with energy conservation – it’s just a revenue raiser. Not to mention politicians aren’t fond of sunsetting ‘temporary’ tax increases.
Cell Phone Bill
Next up is our cell phone bill. Our family of four (4) currently uses AT&T. I get a discount of 15% through work, but I would eventually like to consider switching to something like Google Fi or Republic Wireless in the future. However, I don’t think I’ll be able to avoid the taxes, surcharges, and fees that we pay on each line.
We are paying $8.00 per line just to have a cell phone. With four lines, we are paying $32.00 per month in taxes and surcharges!
Sometimes called ‘sin taxes’, behavior taxes are typically in place to adjust your behavior. However, the skeptic in me believes the government is more interested in the associated revenue rather than a change in your behavior. I have mixed feelings on these taxes, so I’m interested to get your take on them.
I’m going to look at three behavior taxes that our state (Maryland) and county (Montgomery) assess.
Back in 2012, our county introduced a 5-cent per bag tax. This applies to both plastic and paper bags that are provided by any retailer. Picking up carryout Chinese food for dinner tonight? Did you bring your reusable bag? If not, that will be an extra $0.05 please.
The goal with this tax is to reduce the associated litter from plastic bags that end up on the side of the road and in streams. I certainly don’t want any extra litter, but I’m always forgetting to take my bags into the store (or restaurant, Home Depot, etc.). Also, based on some articles I’ve read, it doesn’t look like the amount of bag usage is really going down at all. Furthermore, the county has taken in over $10 million dollars between 2012 and 2016 and it’s not apparent what they have done with that money.
I can see the charge on plastic bags since they are not biodegradable. However, I believe that paper bags should be exempt from this tax as they are biodegradable.
The sales tax in Maryland is 6%. In addition to the excise taxes that alcohol producers and sellers pay, the sales tax for alcohol in Maryland is 9%. Why is alcohol taxed at a higher rate? It’s not obvious if the extra 3% goes towards programs for alcohol abuse prevention programs, underage drinking prevention, etc. My hunch is that it does not (at least the majority of it) so again, another revenue generator for the state.
There is a $2.00 per-pack cigarette tax in Maryland. We don’t smoke, so this tax doesn’t directly affect us. However, there are some unintended consequences that go along with this tax. Just across the Potomac river in Virginia, the per-pack tax is only $0.30. So a carton of cigarettes in Maryland has $20 in taxes whereas a carton in Virginia only has $3 in taxes. If you are a regular smoker or looking to make some extra money on the black market, it’s easy to just cross the border into Virginia and load up on cartons of cigarettes.
I’m also not convinced that all this cigarette tax revenue is going towards tobacco prevention. Although I haven’t tracked down the details, I believe this revenue goes into the state’s general fund. So if there is a dramatic decrease in smoking, where is the state going to find the lost revenue? And don’t get me started on the state’s reliance on revenue from state sponsored gambling.
I will say there is one positive that came from the increased cigarette taxes. It was a catalyst to get my mother to stop smoking after nearly 50 years of this nasty habit.
Of course, these taxes, fees, and surcharges are on top of the income, payroll, property, and sales taxes that we already pay. As you could probably tell from our Sobering Look At Taxes post, we are looking for ways to reduce our tax liability once we leave the 9-to-5 world. One thing we should consider are these ‘hidden’ cost-of-living fees.
Have you taken a good look at the not-so-hidden details in your bills?
If so, are you surprised by any taxes, fees, and surcharges buried in there? What is unique to your locale?