Friday Financial Five - January 23, 2015

Friday, January 23, 2015

Dan Forbes, GoLocalProv MINDSETTER™

Financial ramifications of the White House plan

President Obama’s State of the Union address stressed the economy’s improvement but kept income and wealth inequality front and center. The White House plan involves again increasing capital gains tax on high earners but also implementing a capital gains tax on inherited investments. The president also mentioned a tax on financial institution liabilities to discourage excessive debt. These increased taxes would help fund the “free” community college initiative, currently estimated to cost $60 billion over ten years. Many analysts agree that the chances of pushing through a higher tax agenda with a Republican-led Congress are slim.

U.S. dominates list of richest people

Speaking of wealth inequality, Oxfam’s recent study stipulates that the richest 1 percent in the world control forty eight percent of global wealth. The United States plays the largest role, comprising nearly 30% of the 2014 Forbes billionaires list and eight of the top ten wealthiest people in the world being American. If this global trend continues, the top one percent will have more wealth than the other ninety-nine percent of the population within two years.

The Securities and Exchange Commission’s priority list

The SEC has released the list of priorities for the year and protecting individual investors continues to be the focus. With nearly $16 trillion in defined contribution plans, the regulatory group will be looking for rollovers that move funds from lower cost retirement plans into products that might have higher fees. Along with suitability, the SEC will also be looking at “alternative” investment companies and private equity companies in terms of structure, fees, and marketing.

Hiding money can create problems

There’s a recent report by Creditcards.com that estimates over 7 million people are hiding financial accounts from their spouses or partners. Plenty of couples keep separate finances, so that’s not uncommon. “Hiding” money can present a problem because of the possibility that the hider dies and no one knows about the hidden money or debt. For those committing “financial infidelity” as it’s called, it’s important to create an estate plan and make sure the executor is aware of all funds, including the hidden ones.

Tax break for nursing Moms

Although not a new piece of legislation, there’s a push to remind breastfeeding mothers that pumps and lactation supplies may have tax benefits. According to the IRS Publication 502, pre-tax money can be used from flexible spending accounts for these expenses. For those that don’t have an FSA, the costs may be deducted if the taxpayer itemizes deductions and if total unreimbursed medical expenses exceed 7.5 percent of AGI.

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.