The gas tax
In today's New York Times, Thomas Friedman's article, Win, Win, Win, Win, Win points out the benefits of higher gas tax to Americans. In fact, most economists would agree that a gas tax is the optimal economic approach to creating greater consumer demand for more fuel efficient cars. When gas prices were over $4.50/gallon this past summer, consumers flocked to buy energy efficient cars that got more than 50 miles per gallon. They also traded their gas guzzlers for electric gars, alternative fuel vehicles, mopeds and motorcycles. Higher final value added prices to consumers create more substitution to more efficient transportation options. If the Obama cabinet wants a greener world, a higher gas tax would certainly move Americans in that direction.
Social security taxesCurrently, the governement taxes 6.2% on earnings up to $102,000 earned by employees with social security taxes. The companies that these workers work for are also charged 6.2% of their employees earnings. But as many OMB projections have shown, social security will go bankrupt by around 2015, at a time when many baby boomers will just about be ready to collect. A few years ago, the government raised the age when social security could be collected from 65 to 67 for people born after January 1, 1960.
When Social Security system was developed in the early 1930, people lived much shorter lives than they do today. Today it's not uncommon to know of several family members living into their 90s or over 100!So if Americans are going to live an additional 20 years beyond what the system was originally developed to provide, either 1) the tax percentage must increase beyond the 6.2% or 2) the $102K upper limit of Social Security could be eliminated thus including more revenue from the wealthy 3) the age that people can begin collecting must rise further, or 4) new rules, based on accumulated assets, could be developed so that we can adequately provide for boomers, Gen Xers, Gen Yers and beyond in their senior years.
Higher prices from Greater Market Power
But higher gas taxes are only the tip of the iceberg. As more and more businesses from all different sectors of the economy consolidate from the aftermath of the 2008 financial meltdown, those remaining firms will gain more market power and be able to charge higher prices to consumers. Over time, business firms occilate between various types of market structures--Monopoly, Oligopoly, Monopolistic Competition and Perfect Competition. In many of the most recent recent recessions, it was the firms in perfectly competitive markets that struggled to survive or closed shop. In 2008, it's not only the firms with the smallest market share, but the giant oligopolists with huge market share that are folding.Take a look at banking and small package transportation in 2008. A handful of large companies who serve these markets domestically has been reduced even further. Those who can lower relative costs and continue to differentiate their services will remain the viable firms.
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