Saturday, February 21, 2009

Tax Bonus Offset By Rising Fuel Costs

Let's put President Barack Obama's Saturday weekly radio and Internet address in perspective.

"Never before in our history has a tax cut taken effect faster or gone to so many hardworking Americans," Obama said.

He was referring to passage of one phase of the $787 billion economic stimulus package in which 95% working Americans will take home about an additional $65 per month as a result of tax cuts by April 1.

Specifically, the $400 credit for individuals is to be doled out through the rest of the year. Couples are slated to get up to $800. Most workers are to see about a $13 per week increase in their take-home pay. People who do not earn enough money to owe income taxes are eligible for the credit, an attempt to offset the payroll taxes they pay.

What the Obama administration is not telling the American public is that these increases in take home pay are being slowly eroded by one of the market place's greatest windfalls in the past five months.

That is the price of fuel and gasoline. From a national average high of $4.00+ per gallon last July, it crashed to a low of $1.56 by last September. The economic impact on motorists was substantial. It amounted to a savings of $90 per month for motorists filling their vehicle's tanks once a week, according to industry analysts.

But those savings have been eroded in the past several months. The national average of gasoline has been creeping upward by about five cents a gallon per week to this past week's $1.96, according to the government's It will continue to nudge higher as international demand exceeds supply, especially since Saudi Arabia's cutback in oil production.

The increased price of fuel has a rippling effect on the economy and on its current course will offset any paycheck or rebate adjustments the stimulus package imposes. This applies to non-motorists in higher utility costs and such mundane areas as home delivery of bottled water.

The Obama administration is quickly learning that for every move its makes on the economic chess board, market forces out of their control have a counter move.

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