Americans Are Being Bled Dry by Hidden Taxes
Three private taxes are pushing electricity costs far above what ordinary people can afford.
Americans’ electricity costs, which were already high, are going up again. In response, every state and local government with the muscle to do so should be investing in its own decentralized solar, wind, and water systems to create greater resilience and more democratic local control.
Electricity bills today are at the mercy of three distinct, simultaneous private taxes that have pushed natural-gas and electricity costs far above what people can afford. First, there’s the “AI tax”: the stratospheric rising cost built into the utility grid to support artificial intelligence. In high-demand areas, such as those in the mid-Atlantic and Midwestern states where data centers are being built, wholesale prices for energy are up well over 250 percent. Goldman Sachs, noting the spikes, predicts that 40 percent of future electricity costs will come from the increased demand contributed by data centers.
Then there’s the “utility tax,” which has also been spiking in recent years. States grant private corporations monopoly rights to sell electricity in defined regions, while also allowing them to issue stock, maximize returns, and lobby for unreasonable rate hikes. These investor-owned utilities have overcharged Americans $5 billion per year over the past 30 years.
Finally, there’s the bloody “war tax” caused by Donald Trump’s attack on Iran. The president’s war led, predictably, to the closing of the Strait of Hormuz, through which one-fifth of the world’s supply of natural gas passes. The price of natural gas on the world market has gone haywire since the strait closed and drones attacked Qatar’s largest liquefied-natural-gas facility, shutting it down. The US gas that generates much of our electricity doesn’t travel through the strait, but global buyers are bidding up the price of American supplies as they seek to replace the lost Qatari shipments, creating a “tax” on domestic consumption. When local gas stations use a market shock to increase profits without a concomitant increase in costs, it’s considered illegal price gouging, but big natural-gas companies get away with it when they sell to utilities. No single American state can police all the steps in the supply chain where gouging takes place on its own.
We saw this awful scenario play out in 2022 when Russia invaded Ukraine. Domestic price gougers used the war to get rich while old people froze at home, unable to pay their bills. The war did not change the cost of taking gas out of the ground in the United States, but it dramatically changed the price of electricity. The inflationary shock that beggared millions of Americans was arguably the single biggest factor in the reelection of an unpopular former president in 2024. That president has now decided to launch an incoherent and illegal war, which is leading to more price gouging.
These converging influences on electricity prices should lead us to a wholesale reconsideration of energy policy in the United States. Let’s start by making sure there’s genuine competition and regulation in a natural-gas industry that’s currently dominated by an increasingly small club of companies that profit from volatility.
Two years ago, for example, federal officials allowed Exxon to buy Pioneer in a $60 billion deal to become the dominant shale producer in the Permian Basin of the southwestern United States. But assuming that Exxon will give Americans a hometown discount would be as foolish as it would be costly. At the state and local levels, our elected officials and appointed regulators should stop allowing utilities to merge into monopoly franchises that can then use their market power to hike prices and earn excessive rates of return. States should seize opportunities to permanently protect their residents by making a muscular commitment to build distributed, renewable energy infrastructure as quickly as possible. They should do this not just to protect the climate but also to make our energy supply more reliable and to reap the social benefits that decentralization makes possible. Every community solar installation is a small act of building the kind of resilience we need for a democratic government.
The cost of batteries has been plummeting and will continue to do so, making solar power more feasible than ever. Improved storage capacity can help with the coordination problems that big, dumb grids are used to resolving with brute force. There is no war that can make the sun stop shining, no conflict that can make the wind stop blowing.
The technology needed to significantly diminish the role of natural gas exists today, and it can be deployed in months or, in challenging circumstances, a few short years—not decades. These energy sources are abundant and are much less vulnerable to distribution bottlenecks than shale gas is, and they aren’t subject to the sort of international volatility we are now experiencing.
It will, of course, cost money to build solar infrastructure. But it is much cheaper than the alternative—and the costs will be shared fairly by all of us, as opposed to the private taxes that burden poor Americans the most. To say “We don’t have the money” is to say that people must keep paying unfairly high prices so that wealthy investors don’t have to pony up.
A more decentralized, networked grid also enables people to make their own decisions about which forms of energy are best for their communities. That’s a political question, not just a market one. The fights over data centers prove that people want to be part of that conversation.
The powerful clubs that profit from war, volatility, and monopoly will not stop taxing us if we don’t put up a fight. With this in mind, we shouldn’t try to persuade them. We should build a new future despite them.
