A $4 gallon of gas or an extra $1,000 of income means different things to different people.
Most drivers notice when the price of a gallon of gas goes up by a dollar. But those earning high income don’t feel the pinch quite like those earning low income.
“For low-income consumers, spending on essentials, including energy and food, is a larger share of both their total spending and their income,” Morgan Stanley economists wrote last month. “As of the most recent Consumer Expenditure Survey from 2024, energy spend made up 8.2% of total spending for the bottom 20% income cohort compared to 4.8% for the top. Limiting to just gasoline, gas made up 3.6% for the bottom cohort versus 2.6% for the top.”
Furthermore, fiscal policy affects consumers differently depending on their income level. It usually benefits those at the bottom — but that is not currently happening.
“[We] do not expect the lowest-income cohort (bottom 10-20%) to benefit much from the fiscal bill this year,” the economists added. “Much of this low-income cohort already does not pay federal income taxes because of other credits and deductions, and therefore cannot benefit from the new tax provisions. Meanwhile, some of the spending cuts in the fiscal bill start to ramp up this year, …
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