Friday Financial Five - September 12, 2014

Friday, September 12, 2014

Dan Forbes, GoLocalWorcester MINDSETTER™

Family health premiums stabilize

According to the Kaiser Family Foundation’s recent report, families will only face a 3% increase in health care premiums this year, bringing the average family cost to $17,000 per year. While premiums are stabilizing, there are plenty of other issues that need attention. Small businesses are still having issues with plan options and the average deductible has seen a nearly 50 percent increase in the last 5 years. Workers are also contributing a higher percentage to their employer provided health care premium, now up to 29 percent. Premium stabilization is a good first step, but there still is work to be done to contain overall costs and improve the efficiency of the delivery of services.

The White House plans for “inversion”

The President has been vocal in his opposition to inversion, where businesses try to capitalize on tax benefits provided by foreign merger partners. His administration would like Congress to act to discourage the practice by making it “less financially appealing”, according to the Treasury. Inversion results in less corporate tax revenue and may also have adverse consequences for shareholders of the original company. Changing holdings to the foreign entity may require additional tax paperwork or be subject to a capital gains tax. This also eliminates the possibility of passing along the shares to future generations with a stepped-up basis.

States pushing the auto IRA

Earlier in the year, the White House enthusiastically pushed the concept of automatic IRA accounts for workers without a retirement plan option. With certain limitations, this would allow people to put money away on a tax advantaged basis for the future. While Congress continues to debate the issue, Connecticut, Illinois and Maryland are all taking action to put a program in place at the state level. With traditional pensions going away and retirement security such a priority, it would be surprising if more states don’t follow suit and leave the federal government out of it.

Japan’s 2nd quarter shrinkage

Japan continues to try to spend their way out of big economic problems, as Prime Minister, Shinzo Abe, is committed to a continued stimulus program. The country recently implemented an increased sales tax in hopes of reversing the deflationary economic environment and has plans for a further increase later in the year. While the U.S. economy roared in the second quarter, the Japanese economy was contracting over 7 percent. Japanese investment in business is hurting, public debt continues to balloon, and the question remains if huge government spending can reverse this trend for the world’s third largest economy.

Cyber-security is big business

The Home Depot and Apple breaches remind consumers that they need to be vigilant in protecting personal financial information. Millions of people are subject to identity theft on a yearly basis, and Cyber-security is almost a $100 billion market. For the proactive, the Federal Trade Commission offers guidance on protecting identities and identifying malware on computers. Many home insurance policies offer some form of identity theft coverage for a nominal fee. The coverage may have limitations, so the coverage should be reviewed thoroughly.

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