Friday Financial Five - August 29, 2014

Friday, August 29, 2014

Dan Forbes, GoLocalWorcester MINDSETTER™

States where you can stretch a dollar

The Tax Foundation has put together a helpful state by state comparison to show how far $100 goes in each state. In the analysis, D.C., Hawaii, New York and California are all among the states where $100 has a lower purchasing power. Money is able to go the furthest in Mississippi, Arkansas, and Missouri. The Foundation also correlates higher incomes and higher prices. This relationship is excepted in North Dakota, where income is high and so is purchasing power, providing the best of both worlds.

Burger King deserves a tax break today

Stealing a page from the old McDonald’s ad campaign, “You deserve a break today”, Burger King is putting itself in a more favorable tax position with the recent Tim Horton’s acquisition. By moving their headquarters to Canada, the restaurant chain may benefit from a tactic called “inversion”. This practice, slammed recently by President Obama, occurs when a company relocates to another country to take advantage of a lower tax rate. While the highest corporate tax rate in the U.S. is 40 percent compared to Canada’s 26.5 percent, Burger King is anticipating a smaller tax benefit based on the company’s current effective tax rate.

Additional 401(k) options upon separation

While many who leave a company roll their 401(k) over to a new plan or an IRA, there are other options available. Those younger than age 59 ½ might be subject to a penalty for a standard early withdrawals, but there are exceptions. First, those age 55 or older when they’re fired, quit, or retire are protected from the penalty. The exception doesn’t apply for those younger than 55 who separate from service, leave their money in the 401(k), and then withdraw. Another option is the substantially equal payment exception which anyone can utilize. The 72(t) withdrawal provides payments for at least 5 years or age 59 ½, whichever is longest, and is based on life expectancy.

Politician’s financial aptitude test

Lawyers must take and pass the bar exam. Realtors have to pass a test to be licensed to sell real estate. With elections upon us, is it completely absurd to ask those running for office to pass a standardized test proving a basic understanding of finance? As it stands, elected officials can take office without ever having worked on a budget or demonstrating an understanding of economic projections. Voters should demand that candidates prove they have a grasp on how revenue will be generated and spent, as well as how any pensions they oversee might work.

Another celebrity estate planning lesson

The aftermath of Robin Williams’ passing provided yet another lesson for those planning their estate. Part of Williams’ estate plan, including trusts, was made public. Those handling the estate claim these documents aren’t current, but most people, famous or not, create trust documents to avoid any public spotlight. In this case, two irrevocable trusts named a co-trustee who passed away in 2008. The trust didn’t name a successor, forcing the remaining trustee to petition the court to appoint a co-trustee and make the trusts public.

Dan Forbes is a regular contributor on financial issues. He is a CFP Board Ambassador. He leads the firm Forbes Financial Planning, Inc in Providence, RI and can be reached at [email protected].

Related Slideshow: Massachusetts Business Rankings

See how Massachusetts stacked up.

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WalletHub

Massachusetts has 2015's 28th highest insurance premium penalties for high risk drivers, according to a WalletHub report.

Mass is behind Colorado and New Mexico who come in at 26 and 27 spots respectively while Mass is ahead of Tennessee and the District of Columbia who rank 29 and 30 respectively.

Massachusetts ranks 14th overall in the category of DUI conviction annual premium increase with an amount of $756.

Massachusetts ranks 20th overall in the category of speeding over 20 mph annual premium increase with a total of $261 while ranking 21 overall in the category of two accidents annual premium increase with a total of $1,364.

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WalletHub

Massachusetts has been ranked as the 5th most eco-friendly state in the country, according to a recent study by WalletHub.

Mass ranks tenth in environmental quality and fourth in Eco-Friendly Behaviors landing them in 8th overall.

Mass is behind Minnesota and New York who are in the fourth and third spots respectively, and in front of Washington and New Hampshire who come in at the six and seven spots.

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The Economist

Small Business Friendliness Grade: D+

The Economist grades states on an A+ to F grading scale for its small business climate. Massachusetts ranks near the bottom of the nation, joining New Mexico and New York in receiving D+ grades. 9 states scored worse than a D+ in the Economist rankings.

Overbearing bureaucracy and excessive licensing is stifling small business in America.

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CNBC

#25 CNBC

CNBC ranks each state in cost of doing business, economy, technology and innovation.

Massachusetts' unemployment rate as of May 2014 was 5.6 percent. The state added 9,100 jobs in the month of May.

Forbes

#13 Forbes

Forbes ranks each state in business costs, economic climate, and growth prospects.

The most damning in the commentary:

Massachusetts’ business costs, including labor, energy and taxes, are the highest of the 48 contiguous states—only Hawaii is higher—at 20% above the national average.

ChiefExecutive.net

#47 ChiefExecutive.net

ChiefExecutive.net ranks each state in taxations and regulations, workforce quality, and living environment.

The most damning in the commentary:

Taxation and regulation are always the key barometers. Massachusetts and Oregon are the worst.

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Tax Foundation

#25 Tax Foundation

Tax Foundation ranks each state in corporate tax rank, sales tax rank, and unemployment insurance tax rank.

Massachusetts ranked #49 in unemployment insurance tax.

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Wallet Hub

#10 Wallet Hub

Wallet Hub ranks each state in ROI rank, state tax rank, and overall government services.

Massachusetts ranked #49 in worst roads and bridges, but ranked #7 in overall government services.

ALEC

#41 ALEC

ALEC ranks each state in economic performance and outlook.

Although Massachusetts ranked low in economic performance, a forward-looking forecast is based on the state’s standing in 15 important state policy variables. Some of these variables include top marginal personal income tax rate and sales tax burden.

Kauffman Foundation

#29 Kauffman Foundation

Kauffman Foundation ranks each state in entrepreneurship.

Entrepreneurial activity generally is highest in Western and Southern states
and lowest in Midwestern and Northeastern states.

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Free Enterprise

#18 Free Enterprise

Free Enterprise ranks each state in performance, exports, innovation + entrepreneurship, business climate, talent pipeline, infrastructure.

Massachusetts's reputation as a hotspot for science and technology endures in this year's rankings. The commonwealth is a center for STEM jobs and university research and development, ranking 4th and 2nd, respectively, in those two categories. It also ranks 6th as a center for high-tech establishments. Massachusetts is taking aggressive steps to bolster economic activity with high-impact university-industry R&D projects and new tools for tech-based startup companies.