Friday Financial Five – January 16th, 2015

Friday, January 16, 2015

Dan Forbes, GoLocalWorcester MINDSETTER™

President Obama pushes for “healthy families”

The ironically named Healthy Families Act the president championed this week would allow workers to earn seven days a year of paid sick time. Additionally, a Presidential Memorandum would allow Federal employees to take at least six weeks of paid sick leave when a new child arrives. The White House estimates that 43 million people are currently without company obligated paid sick leave, with only California, Rhode Island and New Jersey offering paid medical and family leave.

The Swiss National Bank removes euro cap

Currency wars are nothing new but the Swiss National Bank surprised the world as they unexpectedly removed a cap imposed in 2011 to keep the franc from rising too high against the euro. A rising currency hurts Switzerland’s domestic exports, but the country must have weighed any adverse effects against the prospect of buying euros to keep the conversion rate in line. With the euro still weakening, the country no longer wants to be beholden to continued buying. There is also the prospect of more easing from the European Central Bank.

Unemployment rate positive, wage increases lagging

Unemployment in December again decreased approaching a level many consider full employment at 5.6 percent. This may worsen if the energy sector faces layoffs due to continued depressed oil prices, but the main concern continues to be the lack of wage increases in conjunction with economic recovery. Part of this may be explained by improved technologies which allow employers to do more with fewer employees. Those, coupled with corporate indecision in the face of changes in healthcare and regulation, are playing a role in keeping wages depressed.

2014 short sellers save big tax dollars

Short selling is the process of selling a home for less than the outstanding mortgage, a deal that has to be approved by the lender. Typically, the amount of loan forgiven is taxable to the borrower. For the 100,000 plus that sold their home short in 2014, there will be significant savings come tax time in April thanks to the extension of the Mortgage Forgiveness Debt Relief Act, which occurred in late December. For example, a home selling last year for $200,000 with $250,000 owed may have been saved over $10,000 in taxes thanks to the last minute extension. The extension was for 2014 transactions only, so those selling this year don’t know about possible tax ramifications at this point.

Metlife sues the U.S. Government

One of the main emphases in recent regulation was to eliminate the prospect of “too big to fail” institutions taking down domestic or global economies. Most of the institutions are banks but there are four non-banks that have this designation. One of the non-banks, Metlife Inc, is fighting the label imposed by the government, arguing that this classification leads to higher regulatory costs and impacts customers adversely. If Metlife is successful in fighting the government’s assessment, it may open the door for other institutions to fight the added compliance costs.

Dan Forbes is a regular contributor on financial issues. He is a CFP Board Ambassador. He leads the firm Forbes Financial Planning, Inc in East Greenwich, 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.