Friday Financial Five – December 19th, 2014

Friday, December 26, 2014

Dan Forbes, GoLocalWorcester MINDSETTER™

Extension of individual tax breaks

Congress finally approved retroactive individual tax breaks for 2014, known as “the extenders." Teachers will be able to deduct up to $250 for classroom supplies paid for out of pocket. Workers who pay for parking or use mass transit may be able to reduce pre-tax income by up to $250 per month for the cost of commuting. Itemizers will be able to deduct state and local sales tax. Subject to income limitations, a tuition deduction of up to $4,000 may apply to qualified tuition, fees and related expenses for college and graduate school. And finally, those over 70 ½ can again gift $100,000 from IRA accounts to eligible charities.

Various outlooks for 2015

As the year closes out, firm outlook reports differ on the economic drivers heading into 2015. It will be the third year of President Obama’s second term. According to S&P Capital IQ, the S&P 500 has returned an average of 16 percent in the president’s third year since 1945. International economies are weaker and dealing with a slower application of stimulus, according to Schwab. Neuberger Berman cites geopolitical conflicts, such as those between Russia and Ukraine, that may disrupt energy supplies and local economies. BlackRock Global expects volatility to continue, while RBC sees corporate profits and conservative earnings forecasts as the driver for any continued stock appreciation.

Consumer Price Index dips with oil prices

The CPI, the all-important inflation measure, recorded its biggest drop in six years. While this will get the attention of the Federal Reserve Board, it’s not expected to lead to a more immediate raise in interest rates. The index fell 0.3 percent in November, the largest decline since 2008. A large part of the drop is attributed to the decreasing price of crude oil, which is at its lowest price in over five years.

Obamacare sign-ups surging

The U.S. Department of Health and Human Services reports that almost 2.5 million people have participated in Open Enrollment in the Federally Facilitated Marketplace, with roughly half new customers and half renewing. There were no reports of any capacity constraints or website malfunctions, despite one million enrolling in the last week. These numbers only represent the 37 states served by http://www.Healthcare.gov and the White House goal of having 9 million enrolled by the end of next year seems within reach. Consumers have a new deadline of February 15th next year to sign up or face a possible fine.

Holiday season can bring liability

No one wants to be Scrooge, but homeowners do need to protect themselves from the possibility of millions of dollars in liability costs. Over the holidays, homeowners are usually most at risk hosting parties where guests consume alcohol or slip and falls are possible due to icy conditions on the property. Home insurance policies typically have $300,000 or $500,000 in underlying liability protection. For higher net worth individuals where the underlying coverage isn’t sufficient, an umbrella policy adding a million dollars or more in coverage might be in order.

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.