Everyone knows that the nation’s economy is experiencing a rough patch this year. Gross domestic product has been in negative territory over the first two quarters of the year. The Dow Jones Industrial average saw a record high of 36,799 points in early January 2022, but by this September it had decreased to 29,260. Both metrics are indicative of a recession. Yet it does not truly feel like a recession because the nation is also enjoying very good employment numbers, and jobs are still going unfilled in many sectors.
In addition to the stock market and the GDP woes, we are also experiencing the worst inflation in forty years. In June, the year over year inflation increase reached 9.1%, and it is still over 8% for both the months of July and August. One economist compared this high inflation as being equivalent to an additional $4,400 yearly tax on each household.
So, what can be done about these problems? Frankly, I do not want to see the federal government do anything more. There is a school of thought that believes that the loose money policies of the federal government are largely responsible for the inflation problems we currently experience. As the Federal Reserve raises short term interest rates, history tells us that eventually the inflation rate will fall as a result.
I would like to see the state and local governments implement short-term efforts to grant a measure of relief to the households in the state. Unlike the federal government, state and local governments need to implement balanced budgets, so the relief they offer would need to be measured and moderate in nature. To begin with I suggest that the state roll back the gasoline tax increase adopted in July. Currently the state gasoline tax extracts 42.7 cents per gallon. Reduce the tax to the old rate of 36.1 cents per gallon and keep it there for a year before returning it to the new rate. Secondly, I would lower the state income tax rate by three-quarters of one percent for a year. If a household has income of $100,000, that tax reduction would save $750 for the year. I would make a reduction on the local (county) income tax rate for a year as well. The county raised the income tax rate to 3.2% in calendar year 2020. I would return it for one year back to the old rate of 2.83%. None of these one-time adjustments would break the back of state or local budgets, and individual households would experience a measure of relief. Let’s see what our leaders decide to do after the election.
Eric Rockel
Vice President, GTCC