Low Oil Tax Cut

Discussion in 'Economics' started by loyek590, Dec 17, 2014.

  1. loyek590

    loyek590

    this one has to piss the liberals off to no end. Even Janet Yellen in the FOMC question and answer refers to low RBOB as a "tax cut" for the American people, and claims it is good. So doesn't that mean low taxes are good for ordinary people?
     
  2. loyek590

    loyek590

    I mean, why don't they ever say, "If we gave the people a tax cut, it would be just like oil going from $90 to $55!"?
     
  3. wheaties

    wheaties

  4. loyek590

    loyek590

    well, my point was, even Janet Yellen believes an "oil tax cut" is good for the economy. They call a cut in the price of crude a "tax cut" and everybody including the federal reserve just assumes it is a good thing. But boy, go to Washington and try to get a tax cut and it is the end of life as we know it.
     
    burn8 likes this.
  5. loyek590

    loyek590

    in otherwords, giving the American working class a break is the responsibility of Saudi Arabia and of no concern of ours

    If they want to lower the burden of gasoline on the American working class, that is their business

    But we are not giving up one red penny in the real tax burden. We need that money, and we don't really give a shit how much that helps them.
     
  6. wheaties

    wheaties

    Oh I see what you are saying. Well, this applies to everyone whereas most changes in taxes tend to target specific groups. Also, nobody in DC is losing money since the federal gas tax is per gallon.

    My point was that in the long run its probably not a net benefit to the consumer since wages will ratchet down along with prices and eventually we will be right back where we started.
     
  7. loyek590

    loyek590

    I hear ya, couldn't agree more, I just find it funny that they equate lower prices at the pump to a tax break. If we get a mild winter lower heating costs will be just like a tax break. If Comcast lowers their subscription rates it will be just like a tax cut. If fewer kids decide to go to college it will be just like a tax cut for the parents. If a tornado crashes into an old folks home and kills all the residents, it will be just like a tax break for their heirs.

    but one thing everybody agrees on is, a tax break is good.
     
  8. achilles28

    achilles28

    Not true. Energy is the number#1 supply factor input cost. Lower that, and the supply curve shifts right, along with a commensurate price decline and GDP increase. In laymans terms, the consumer gets richer as energy gets cheaper. More money is freed up to be spent on other things (cars, appliances, homes, vacations). Put another way, as energy gets cheaper, the economy grows faster...

    Think about the flipside....if oil were 500 dollars a barrel instead of 50, how much would the average consumer spend on energy as a percentage of their income? More or less? How would that effect spending in other categories, given expenditures are zero-sum (when one category is more, another must be less)? How would that impact living standards (go down, or up)?
     
  9. wheaties

    wheaties

    >> if oil were 500 dollars a barrel instead of 50, how much would the average consumer spend on energy as a percentage of their income?

    Over the long term - the same.

    For the sake of conversation, say all prices went up 10x due to oil. I would raise my hourly rate 10x. A burger would cost 50 not 5. Basically, append a zero after every wage and price. Relatively they are the same.
     
  10. achilles28

    achilles28

    No, that's not how it works. When all wages are pegged to actual inflation, the result is a wage-price spiral. South America routinely does this. African countries (Zimbabwe). Over time, it destroys the value of the currency....burgers go from 5 > 50 > 200 > 500 > 1000 etc.

    Further, for the sake of conversation, wage earners don't have final control over their pay. So when oil doubles, their wages won't. And when oil falls, their wages aren't cut in half. So in real life, energy prices impact the economy greatly.
     
    #10     Dec 19, 2014
    der_kommissar and RichardRimes like this.