Good morning and happy Thursday Money readers. Jayme Deerwester, here with you again.
🗞 News you should know 🗞
“One way to fight inflation is to drive down wages and make Americans poorer,” President Joe Biden said during Tuesday’s State of the Union address. “I have a better plan to fight inflation. Lower your costs, not your wages.”
Biden proposed making more goods, from as cars to semiconductors, in the United States in order to lower their production costs, which that are then passed on to American shoppers. Doing so would also make U.S. consumers less vulnerable to supply chain bottlenecks abroad, Biden said.
There are advantages to moving production to the U.S. Manufacturers would benefit from a just-in-time production model where goods are made as orders are received and can be delivered to consumers more rapidly, said Harry Moser, founder of the Reshoring Initiative, an industry coalition advocating for making more goods in the U.S. That helps drive down the costs of holding and storing unsold inventory. Producers also would avoid hefty shipping fees, tariffs and value-added taxes on imports, he added.
Not everyone’s on board: “It’s nonsense,” said Steven Blitz, chief U.S. economist at TS Lombard, a research and consulting firm. “Why did firms put their production in China? Because it’s cheaper,” Blitz said. “And the beneficiary of these cheaper products has been the American consumer.”
Among the hurdles to moving more production back to the U.S.: pay for American workers is about six times higher than their Chinese counterparts. And then there’s the labor shortage.
“If we don’t have more toolmakers, welders, precision machinists, then we don’t have the capacity to produce products (in the U.S.), and especially without wages going so high that they will drive up inflation,” Moser said
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💡 Daily insight 💡
How much oil does the U.S. buy from Russia? Not much, but gas prices are rising amid Ukraine invasion.
The national average price for gasoline hit $3.66 a gallon on Wednesday, up 34% from a year ago, according to AAA.
Biden has warned that defending freedom in Ukraine will cost Americans, and many are starting to feel the pinch at the pump, saying, “I will do everything in my power to limit the pain the American people are feeling at the gas pump. This is critical to me.”
- Draw from the Strategic Petroleum Reserve. During the State of the Union, Biden said 30 million barrels of oil from reserves should “help blunt gas prices here at home.” But Patrick De Haan, head of petroleum analysis at fuel-savings app GasBuddy, says 30 million barrels is “way too small” to get the market’s attention.
- Lift the gas tax. A group of Senate Democrats has proposed legislation that would eliminate the federal gas tax through the end of the year. But the proposal has run into resistance from both Republicans and some Democrats, making it a longshot to pass in the Senate, which requires 60 votes to overcome a filibuster.
- Keep using winter gasoline. GasBuddy’s De Haan says federal officials issue a waiver that would allow winter-blend gasoline (which allows gasoline to ignite more easily to start cars in colder temperatures) to be sold through the spring and summer. Why? Winter gasoline is cheaper to produce. “The change to summer gasoline (is) usually something that boosts prices by 25 to 75 cents a gallon,” he says.
- Increase supply. De Haan also points to increased production as a way to offset rising costs, something that could be accomplished through a new nuclear deal with Iran, which has been under sanction since 2018. The country produces roughly 2 million barrels of oil a day – less than one-fifth of Russia’s production rate, but it’s “still something,” according to De Haan.
💵 All taxes, all the time 💵
Working remotely certainly has its benefits, and it’s an option that’s allowed many people to pad their savings due to not having to spend money on commuting. But in some cases, it could create a tax headache.
- Regardless of where you worked last year, you need to file a federal tax return. But you may also be required to file more than one state tax return. The problem, however, is that determining whether you need to file another state tax return can be complicated. That’s because different states have different rules.
- You can’t be taxed double on your income just because you did your job from two states. But working in two states could create an extra tax liability for you. Most states offer a tax credit that offsets your liability if you’re not a resident there.
- If you spent a significant amount of time working remotely in a state other than your home state, then it’s probably best to consult an accountant or tax professional to get advice.
🎶 Mood music 🎶
Today’s lyric is inspired by our story on keeping kids safe from mental harm on TikTok and comes from Marina’s “Oh No!”: If I fail, I’ll fall apart. Maybe it is all a test. ‘Cause I feel like I’m the worst. So I always act like I’m the best.”
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.