Rising electricity bills also increase your sales taxes paid to the state

You’ve probably noticed that you pay a 6.875 percent sales tax on the electricity you use in your household unless that electricity is for heating your home. This means that every time the Minnesota Public Utilities Commission (PUC) votes to approve an increase on your electric bill, they are effectively increasing your sales tax, as well.

U.S. Energy Information Administration data show that Minnesotans spent $7.38 billion on electricity in 2021. Some of this electricity is used for home heating, which means it is exempt from sales taxes, but for the sake of simplicity, let’s assume all of these sales are taxable. This means Minnesotans paid $507.3 million in state taxes on electricity that year.

Unfortunately, when the price of electricity goes up, so do the taxes. This means Xcel Energy’s proposed $677.4 million increase in electricity costs will lead to an additional $46.5 million in state taxes.

What many people don’t realize is that Xcel’s proposed $677.4 million electricity cost increase is merely the tip of the iceberg. It does not account for the billions in new spending on wind turbines, solar panels, and transmission lines recently approved by the PUC. As a result, electricity rates, and the taxes on power, will increase accordingly, adding insult to injury.