Friday Financial Five – October 23, 2015

Friday, October 23, 2015

Dan Forbes, GoLocalWorcester Contributor

Tax rates for the S&P 100
The discussion regarding individual taxes and corporate tax rates continues in the ever evolving discussion to create a fairer tax framework. Wallethub compiled the effective tax rates for S&P 100 for the 2014 tax year, including state, federal and international taxes. While the overall average tax rate of 28% was unchanged from 2013, some discouraging trends continue to persist. Morgan Stanley had an overall negative tax rate. General Motors pays a drastically lower overall tax rate than the average S&P 100 company, thanks to a -36% federal rate. Warren Buffett’s company, Berkshire Hathaway, pays almost exactly the average overall rate, while CVS pays significantly more at an overall rate of 40%.

Student debt examined in court cases

Those that have accrued massive student debt might cringe when hearing presidential candidates talking about the concept of “free” in-state tuition. For those burdened with school debt, it is extremely difficult to get those loans discharged, even in a bankruptcy. Courts are examining the definition of “undue hardship” that would have to be proven by the borrower to allow a discharge. The case of Robert Murphy should have the nation’s attention. At age 62, in 2012, he petitioned the court to relieve him of over $200,000 in PLUS loans. This and other cases may lead to a Supreme Court decision where a less stringent litmus test is used to allow the discharge of loans.

Perkins loan goes away

Speaking of student loans, the United States’ oldest government student aid program, the Perkins Loan, is no more. The formula for calculating how the loan was allotted was cited as being complicated and favoring more expensive schools that didn’t necessarily need the assistance for their enrollees. The loss of the program is expected to greatly affect smaller private colleges, as some have roughly a third of their students relying on them. This may accelerate declining college enrollment which has been evident over the last few years as more high school graduates seek employment instead of a debt laden education. Some in Congress continue to push for the program’s reauthorization.

Analysis of Health Savings Accounts

HelloWallet (no relation to Wallethub), a website that attempts to help employees maximize their benefit offerings, analyzed Health Savings Accounts administered by UMB Bank. According to their findings, the average HSA holder is 44 years old, makes almost $90,000 per year, and has over $2,000 contributed to the account between employee and employer. The number of large employers using this type of health plan is up almost 50% in the last two years. Employers contributing to a place appears to be very important, as there’s a direct correlation between what an employer puts in and the corresponding employee contribution.

Social Security in 2016

For Social Security next year, there are a few considerations to keep in mind. There will be no cost-of-living adjustment for payments, with the average payout expected to be $1,341 per month for singles and $2,212 for couples, though there will be a slight decrease in the maximum possible benefit. There will not be an increase to the maximum amount of earnings ($118,500) subject to the income tax for Social Security. The taxation on social security benefits for those that continue working will also remain the same. The big question facing retirees will be Medicare and the decision to take benefits or not. Those already receiving Social Security payments won’t see an increase to their Medicare premium, while those choosing whether or not to take Social Security could face a significant increase.

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.