Good morning and happy Thursday, Money readers. Jayme Deerwester, here with you again.
🗞 News you should know 🗞
Inflation reached a new 40-year high in February as pump prices, propelled higher by the Ukraine war, combined with rent, food and other rapidly rising costs, continue to squeeze Americans already struggling with sky-high costs.
The consumer price index jumped 7.9% annually, the fastest pace since January 1982, the Labor Department said Thursday. That’s up from 7.5% in January, which was also a nearly four-decade high.
Gasoline prices leaped 6.6% and made up nearly a third of February’s rise. Pump prices were up 38% from a year earlier.
Inflation now has hit fresh 40-year highs for four straight months.
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⛽️ Between a pump and hard place ⛽️
With gas prices at record highs across the U.S., an increasing number of governors and state lawmakers are calling for the suspension of gas taxes to provide relief to motorists who are facing the prospect of even higher pump prices as the country cuts off Russian oil imports.
Proposals for a “gas tax holiday” to counter inflation had been moving slowly in Congress and state capitols before Russia invaded Ukraine, but they have gained momentum this week amid surging prices that averaged $4.25 a gallon on Wednesday, according to AAA.
The idea has support on both sides of the aisle but critics of the proposals say there is no guarantee the savings would get passed on to consumers and worry that suspending gas taxes could hurt funding for road projects.
You can see the average price for a gallon of gas in all 50 states here.
💡 Daily insight 💡
If you think inflation is wild now, look at how it has spiked over the past century. Whether it was pandemics or war, inflation has raised its ugly head several times over the past 100 years.
Only two events in the past century have driven the national debt high enough to approach the annual gross domestic product of the country: World War II and COVID-19. Just as in World War I, the country relied on the Fed to keep interest rates low and let the money supply grow rapidly to finance the war.
Concerned about potentially slipping into another Great Depression after the war, Fed policymakers initially kept their easy-money policies in place. Americans went on a shopping spree with money they couldn’t spend while the country was on its war footing. That led to a price spiral that topped out near 20%.
💵 All taxes, all the time 💵
If you owe the IRS a whopping sum and don’t have enough money in the bank to pay it by the April 18 tax deadline, worry not. For one thing, the IRS will almost always allow you to get on an installment plan and pay off your tax debt over time. But in some cases, it may also be possible to negotiate your tax bill downward. Here’s what you need to know.
Qualifying for an offer in compromise isn’t easy. To do so, you must prove a couple of things:
- That you don’t have the income or assets to pay that bill, and that situation is unlikely to change
- That paying your full tax bill will constitute a major financial hardship for you
Most of the time, the IRS will not let you off the hook when you owe money on your taxes. But in more extreme situations, the IRS might agree to an offer in compromise.
🎶 Mood music 🎶
I don’t believe I’ve quoted the Beastie Boys since taking the reins of this newsletter. So in honor of Washington’s quasi-bipartisan mood on suspending gas taxes, I’m going with 1998’s “Negotiation Limerick File”: “I love it when you hit those switches. A curve ball’s what my pitch is. So here we come, like dum-ditty-dum. I keep all five boroughs in stitches.”
LISTEN WHILE YOU WORK: Remember, you can listen to this song and every track I’ve quoted in the newsletter in the Daily Money Mood Music playlist on Spotify.