Rising Gas Prices Will Likely Wipe Out Tax Cut Benefits For Millions Of Lower And Middle Class Americans
Gas prices have risen this month. And if they rise $1.05 per gallon off their current marks, it would eat the disposable income gains of last year’s tax cut legislation, according to Deutsche Bank analysis.
The national average is now $2.76 a gallon, according to GasBuddy , which is close to the most recent high in mid-2015. A $1 gain per gallon would represent a full return to the soaring prices of 2014, when the average price for a gallon approached $3.70. From 2011 to mid-2014, prices were at this level.
While a $1 increase would be required to cancel out benefits for families of all income levels, lower-income families’ gains would be wiped out much more quickly.
In fact, Deutsche Bank analysts expect this to happen sometime this year for these lower-income groups, as the rise in disposable income gets eclipsed by rising oil and gas prices.
Lower-income families usually spend a higher percentage of their budget on gas, making price changes more pointed. The lowest-earning 20% of American families spend 8% of their household budget on gas and oil. For the top 20%, it’s less than 2%.
But that’s not the only factor. The tax cuts heavily favor wealthier households, giving them more of a push even if they’re paying more in gas. For the bottom 20% of families by income, the tax cut gains are only around $50, according to the U.S. government’s Joint Committee on Taxation. At the same time, a household that earns $200,000 would save $12,000. At 2014 prices — the worst-case of gas prices in recent memory — that would pay for 81,075 miles in a 25 mpg vehicle.
According to Deutsche Bank, the relationship of disposable income and energy has long been a tight one. For every one-cent rise in gas prices,consumer spending on non-energy goods and services has fallen $1.16 billion. So thus far, from last year, analysts are expecting a reduction of income allocated to non-energy stuff to fall by $35 billion.
Tags
Who is online
99 visitors
Think of how much worse it would be without the tax cuts. Trump won't get blamed, but the Arabs will for colluding to lower production levels.
Nah. What ever gains or benefit the lower and middle class expected to reap were already 'wiped out' by the Trump/GOP tax cuts.
If American's prosperity hinges on the price of gasoline, then the tax cuts removed the hinge pins.
Mexico is going to pay for that wall too, right?
It hinges on much, much more. You should educate yourself.
And my point was obviously missed, again.
Mexico is going to pay for that wall too, right? ( Hint. This is not the point )
Wait till prices increase on pretty much everything, which is already starting. Healthcare, computers, phones, houses, clothing, gas,.....and some jobs will go with those tariffs too, as the small amount of jobs gained will be dwarfed by the loss ripples from all the other areas, like farming, dairy, food.. By election time it will be even more obvious. And boy do dems have a lot to run on, especially the GOP Social Security and Medicare cuts they've not been shy about, Paul Ryan has been public about it and there is sooooo much material.
The Trump/GOP tax cut was a wealth transfer. Anyone who thinks otherwise is.....................uh...................well, read em' and weep, suckers.
Why his supporters are not a bunch of jealous socialists that believe in government stealing and redistributing what another man has.
Politics to one side, I am more curious as to the latest justification de jour of rising fuel costs.
If I may ask: Whatever happened to drill baby drill? Oh I'm sorry that was a couple of election cycles ago.
"Surprise Surprise Surprise" - Gohmer Pyle...
I’m not surprised there is high demand right now and we saw similar prices in 2015.
While demand is higher, the contributing factors of OPEC's cutback, decreased shale production, commodity trading and our weakening dollar all play a huge roll in the pump price.
Good thing we cut taxes.
It sure would hurt more without the cut.
Hell, we're still catching up from the record high gas prices during much of the Obama administration
Did you rail against Obama then John?