SPEAKING OF TAXES AND INFLATION

Tax

Tax (Photo credit: 401(K) 2013)

I few months ago I asked myself the question “What happens if gas prices start spiking at the same time taxes are spiking?” Well as it turns out, gas is climbing and so are taxes. Debbie Bruister, a mother of four, received a $1,160 raise this school year- about $97 a month, before taxes and other deductions – but the elimination of the payroll tax break shrunk her and her husband’s paychecks by more than $270 a month. They’re paying $3.51 a gallon whereas they were paying less than $3 per gallon in 2012. –http://finance.yahoo.com/news/middle-class-expenses-grow-faster-111900178.html In Virginia, the governor has managed to raise taxes and gasoline prices in one fell swoop by enacting a new wholesale tax on gas paid by distributors, which you know is going to affect the price at the pump. Glad I bought that 4 cylinder Civic.

So below I listed a few inevitable outcomes to gas and taxes spiking at the same time just off the top of my head:

– Increased food costs

– Break down in various supply chains

– Less disposable income – decrease in non-essential spending

Corporate profits begin getting squeezed

Less profits means smaller (or no) raises for employees

Leading to even less disposable income, and the cycle starts feeding on itself

– Becomes more expensive to drive to work

– People (teens mostly I’d imagine) begin stealing gas

– People begin to struggle paying bills

– Loans become harder to get

All of the above can lead to civil disorder, or at the very least people becoming far more uptight and stressed out.

As people have less and less buying power, they will begin losing confidence in the dollar, and as this happens people and countries will stop investing in US Bonds. If that happens then the government will have as much trouble servicing its debt as the individual is having, but that is another topic entirely.

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Posted on March 6, 2013, in Resilience and tagged , , , , , , , , , , , , , . Bookmark the permalink. Leave a comment.

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