President Donald Trump made positive strides with the Tax Cuts and Jobs Act (TCJA) of 2017. Tax-payers, who began to see benefits of it in 2018, may find those benefits fleeting, however. To that point, the tax cuts of TCJA that were geared toward helping Americans hold on to more of their earnings may never be felt because of rising gas prices. USA Today reports that the result of the increase is likely to “erase” portions of any savings that resulted from the tax cuts.
Gas prices went as low as $2.25 a gallon in July 2017, but recently the prices have substantially increased. And that includes a 25-cent uptick in the last two months. The hike is certain to curtail the spending of many consumers and also constitutes a double whammy for the poor and middle class, who are already feeling the pinch of rising health care costs.
Federal subsidies make premiums a bit more tolerable for those close to the poverty line, but the gas price hike will likely be dipping into their pockets the most, according to Morgan Stanley Research. Drivers often meet the challenge of higher prices at the pump by combining errands, foregoing road trips and dining in vs. eating out.
Morgan Stanley weighed in on the matter of by saying how rising gas prices were negatively impacting the take-home pay of workers in a note to his clients. He wrote that,
” While the tax cuts have lifted take-home pay for the vast majority of workers, rising gasoline prices are eating into that benefit.”
Fifty-one-year-old Felicia told USA Today that she saw an additional “$30 in her bi-weekly paycheck” when TCJA went into effect. She put the extra cash from the tax break into a savings account. She went on to say that, “Thirty dollars is not going to make or break me,” and added that the higher prices at the pump were “killing” her.
All these factors into a growing sentiment that the government can often make matters worse instead of better when they tweak a complex system or react in “knee-jerk” fashion to crises.
Case in point: Politicians tried to “fix” healthcare’s rising costs, but many Americans felt the drain to their budget as the ugly reality of the Affordable Care Act (ACA) set in. CBS reports that many are experiencing that ugly reality by way of sharp rises in premiums.
Many saw their premiums nearly double this year, and there are predictions that premiums will continue to rise in the coming year, making the name of the Affordable Care Act a misnomer to many.
President Trump’s recent decision to withdraw from the 2015 accord with Iran and impose financial sanctions on the Islamic Republic caused crude supply concerns that reverberated and caused a spike in gas prices.
A second factor that led to the spike in gasoline is the law of supply and demand. Supply and demand dictates the rise and fall of gasoline and oil prices. When demand is greater than supply, prices rise. As of late, supply limits have been maintained by OPEC, although economic growth on a global scale has heightened demand.
Other factors that can cause gasoline and oil prices to rise include seasonal demand and commodity traders that buy gasoline and oil at “commodities futures markets.”