Wall Street analysts unanimously cheered last fall when the price of oil fell from nearly $100 a barrel in June of 2014, to almost $45 a barrel by the end of January 2015. The theory was that the average American family, paying less at the pump, would plow this savings into other goods and services, giving GDP a much needed boost.
In the winter of 2014 optimism about a strong 2015 was abound. The average household was now poised to have an extra $750 a year that would soon be burning a hole in their pockets. Falling gas prices would free up billions of dollars for consumers to spend next year, with the spend-happy middle class seeing most of the benefit.
Lower prices at the pump was the equivalent of cutting taxes between $100 billion and $125 billion. Increased consumer spending as a result of lower gas prices were predicted to add as much as a half-percentage point to economic growth in 2015.
With first quarter GDP now running negative, it is clear this “gas tax” did not have the simulative effect analysts had hoped for.
What Happened To Our Gas Tax Windfall?
It appeared most analysts assumed if consumers liked their gas tax cut (much like Obama’s promise to keep their health plan)…they could keep it. Unfortunately Obamacare may be the Grinch who stole the gas tax gift meant for consumers. An increase in what the average American pays in health care costs as a result of the Affordable Care Act (ACA) has swallowed all the savings from the fall in gas prices.
The first victims of Obamacare were small businesses, who quickly learned their once sufficient coverage did not match the arduous ACA mandates. The increase in health care costs passed on by employers caused Individual year-round employees at businesses with 50 to 99 workers to lose $935 in take home pay annually, while those at firms with 20 to 49 workers were out an average of $827.50. And workers with solo coverage now pay an average of $1,081 in annual premiums, according to a Kaiser Family Foundation/Health Research & Educational Trust report–up a whopping 8.1% from a year ago.
