Friday Financial Five – March 25, 2016

Friday, March 25, 2016

Dan Forbes, GoLocalWorcester Contributor

Tax tips for delayed tax day

Tax filing for personal returns is extended beyond the traditional April 15th deadline to April 18th. It’s important to review 1099 forms issued for non-retirement accounts to identify missing cost basis. If the custodian doesn’t have all of the information to report, capital gains for the tax year may be overestimated leading to unnecessary or incorrect tax payments. Those within the income limits to make traditional and Roth contributions might consider splitting the $5,500 maximum contribution in half to take some tax benefit now while reserving some tax benefit for retirement.

TRID has increased mortgage loan costs

Housing numbers have remained strong thanks to low rates, but the latest regulatory changes may be increasing costs to lenders. The TILA-RESPA Integrated Disclosure (TRID) has resulted in an estimated increase per loan of over $200. That comes from STRATMOR, who calculates that less than 20% of that cost can be passed along to the consumer through additional fees. Banks surveyed were meeting more headwinds adhering to the new guidelines. Generally, the regulations have resulted in a longer period of time from application to closing, but with more informed and satisfied customers.

Suggested merger of Fannie and Freddie

A most pressing mortgage issue is what to do with Fannie Mae and Freddie Mac, which are currently held in federal conservatorship. A group of experts have suggested merging the two into a single government corporation in the report: “A More Promising Road to GSE Reform." The new corporation (named the National Mortgage Reinsurance Corporation in the report) would have more flexibility, would be required to lend to underserved communities, and wouldn’t be motivated by profit. Ideally, competition would increase and the gap between large and small lenders would close. In the proposal, the Federal Housing Finance Agency (FHFA) would still retain oversight authority.

Yale endowment tax

When times are tough, the logical solution to generate tax revenue would dictate going where the money is. That’s lead to the discussion of a national wealth tax, where those above a certain net worth would face a single payment to plug the gap in entitlement spending. In Connecticut, Yale may face an “endowment tax” to help plug the $266 million shortfall for fiscal year 2016. A proposed bill would tax schools in Connecticut with over $10 billion, with Yale the sole representative in that category. The school currently gives over $8 million per year as a voluntary payment while holding an endowment of almost $26 billion.

Another professional athlete awarded financial justice

Athletes continue to be magnets for financial wrongdoing. Famous second banana, Scottie Pippen, was awarded restitution in a fraud case against a Chicago investment advisor. The advisor obtained fraudulent loans and a line of credit in the name of Pippen from Leaders Bank in Illinois. He then used the loan for his own purposes. The court ordered the advisor to pay Pippen $400,000 and Leaders Bank $1.16 million, while also slapping a three-year prison sentence on the perpetrator.

Dan Forbes, a CFP Board Ambassador, is a regular contributor on financial issues. 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.