Friday Financial Five – November 6, 2015

Friday, November 06, 2015

Daniel P. Forbes GoLocalWorcester MINDSETTER™

Budget deal still a work in progress

Getting a budget deal done before December is a major step for a usually punchless Congress, but it still isn’t finalized. The basic framework agreed to last week would help shore up the Social Security disability insurance program, which has been damaged by fraud and waste over the years. Facing a severe benefit cut, the agreed upon changes would increase how much is paid into the disability fund through payroll deductions. Medicare premium increases would also be curbed. However, there is some disagreement about the decrease in defense spending. Republicans would also like to eliminate federal spending on state health care exchanges and reduce some regulatory authority granted by Dodd-Frank. While it appeared Congress had reached agreement well ahead of schedule, it may be another case of a mid-December resolution.

Salesforce addresses gender pay inequality

Reports differ on the disparity between pay for the genders, but women are generally considered to be receiving 80 percent of men’s pay for similar work. Like the minimum wage, gender pay inequality has long been talked about but mostly met with inaction. In what is considered a major step forward, Salesforce, with more than three quarters of their 17,000 employees being male, adjusted salaries for their female employees against male counterparts. It’s considered the first occurrence of a large private company publicly addressing income differences.

Forbes ranks business climate in each state

For states to have an effective business climate, it’s imperative that workers are able to find desirable jobs and experience wage growth. The top of Forbes’ (http://www.forbes.com/best-states-for-business/) 2015 list of best business climates benefit from low entry costs and an absence of regulatory hurdles. Utah and Virginia again head the list, with Massachusetts ranking 18th despite coming in dead last in business costs and Rhode Island coming in 46th thanks to a low ranking in regulatory environment. Some interesting metrics added to this year’s rankings: commute times, prevalence of business litigation, and the state’s fiscal health, a factor that undoubtedly didn’t help Illinois’ ranking.

3rd Quarter GDP positive

Following a strong second quarter, Gross Domestic Product for the country met expectations with 1.5% annualized growth in the third quarter. Positive GDP numbers are always nice, but it’s still a far cry from an ideal economic output. The Commerce Department noted a drop in private investment, government spending, and a decrease in inventories. As with every quarter, the possibility of a revision exists as more details come in, but the perception of continued economic strength seems to have given Fed members confidence to finally hike rates in December.

Divorce and tax considerations

Divorce and taxes are two topics most people would rather not think about. Those going through the divorce process or newly divorced need to avoid certain tax pitfalls. “Payers” or “payees” of child support and spousal support may need guidance on deducting these amounts on a tax return. Generally speaking, child-support is non-taxable income to the person receiving it and not tax deductible for the person paying it. Conversely, spousal support is taxable to the person receiving it and tax deductible to the payer. If these payments are not structured properly in a divorce agreement, there are many ways the IRS can audit, re-classify these payments, and charge penalties and interest. Other topics of concern include the claiming of children for the tax credits and deduction of divorce related fees. The divorce process can be painful enough, so it helps not to compound it by absorbing unnecessary taxes and fees.

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.