Friday Financial Five – January 29, 2016
Dan Forbes, GoLocalProv Contributor
Friday Financial Five – January 29, 2016
Defaults on student loans growing
According to ADP, garnished wages are up dramatically as over $1 billion in government backed student debt is being collected yearly, a 40% uptick from 2006. Parents are a big part of this as they are on the hook for their student’s debt in many cases. This report coupled with the Simple Dollar review of states with the most student loan debt makes for a scary proposition. New Hampshire leads the way with over three quarters of the state’s students graduating with debt. Rhode Island placed sixth with an average of debt of over $31,000 and 65% of graduates incurring loans.
Possible wrinkle for Social Security payments to ex-spouses
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLAST“Graying” or later-in-life divorces have been steadily increasing in recent years. In 2014, couples age 50 and older were twice as likely to make the decision to separate than in 1990, and for those over age 65 the statistics were even higher. The proposed changes to social security claiming strategies could present a wrinkle for those who plan to collect on their ex-spouse’s social security for a source of retirement income, provided they were married for 10 years or longer. Under the proposed changes in section 202(z)(3)(B), when someone suspends their benefit to age 70 to earn more credits, “no monthly benefit shall be payable to any other individual on the basis of wages and self-employment income”. In the past, the divorced spouse didn’t need the other spouse to file to be eligible for benefits (but had to be age 62 or older). With the changes taking place in April of this year, a former spouse who suspends could potentially cause the divorced ex-spouse to lose access to benefits until that time as well.
Democratic candidates cite executive action to raise taxes
Hillary Clinton and Bernie Sanders have raised the possibility that they would employ executive action to bypass Congress and raise taxes. Both are in favor of closing the carried interest and inversion loopholes. Sanders would close “check-the-box” elections which favor multinational companies. Clinton is targeting IRA money and would like to cap the amount that can be accumulated. By implementing their tax policies, Clinton hopes to raise half a trillion dollars in new revenue, while Sanders’ plans would result in trillions in new dollars to fund college and single-payer healthcare.
Metlife and “too big to fail”
Regulations have come fast and furious since the events of 2008, and one company, Metlife, considered breaking up in the face of stricter capital requirements. Metlife, the country’s largest life insurance company, told regulators in 2014 that being labeled too big to fail might force action to reduce the size of the company. More recently, Met announced the possibility of selling or making public their domestic retail business. Other companies may follow as being labeled systemically important could mean costs and controls too onerous to sustain profitability.
Cable cord-cutting in action
Getting out from under the thumb of the cable companies does take some work and putting a cost-cutting plan into action isn’t always smooth sailing. In a household with many devices using internet, the most important aspect is the internet speed and functionality, and this may cost an average of $60 per month. Many combine Sling TV for $20 per month, Netflix at $10 per month, and then add an antenna for local channels and Roku 3 for a total one-time purchase of $160. For someone paying $175 per month for cable, the monthly savings in this example for the first year alone would be over $800, but rates will vary. Reduced selection and a household at the mercy of the internet provider is the downside.
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 dforbes@forbesplanning.com.
RI Business Rankings in US
WalletHub
Rhode Island has 2015's eighth highest insurance premium penalties for high risk drivers, according to a WalletHub report.
Rhode Island ranks fifth overall in the category of speeding over 20 mph annual premium increase at $482. While ranking third overall in the category of 2 accidents annual premium increase at $2,721.
Rhode Island ranks ninth overall under the reckless driving annual premium increase at $749.
WalletHub
Rhode Island has been ranked as the 8th most eco-friendly state in the country, according to a recent study by WalletHub.
Rhode Island ranks third in environmental quality and 16th in Eco-Friendly Behaviors Ran landing them in 8th overall.
RI is behind Washington and New Hampshire who are in the six and seven spots respectively, and in front of Connecticut and Hawaii who come in at the nine and ten spot.
WalletHub
Rhode Island is 2015's 4th Worst State to be a taxpayer, according to a recent WalletHub report.
Rhode Island ranks 48th of 51 with an average state and local tax price of $7,159 which is good for a 27% difference from the national average.
The states that are directly behind Rhode Island are Wisconsin at $7,159, Nebraska at $7,298 and Illinois at $7,719 for a 37% difference from the national average.
WalletHub
Rhode Island has the highest vehicle property taxes in the country, paying an average of $1,133 according to a report from WalletHub.
Virginia and Kansas are the two states just ahead of Rhode Island in the 49 and 50 spots, paying $962 and $905 respectively.
RI also ranks 42nd in average real estate tax, paying an average of $2,779, according to the WalletHub report.
WalletHub
WalletHub has ranked Rhode Island as the 7th worst state to be rich in in a recent in depth analysis of 2015's Best States to be Rich or Poor From a Tax Perspective.
On a scale with 1 being the best, and 25 being average, Rhode Island ranks 37th in low income earners, 42 in middle income earners and 45th in high income earners.
To see the full report, click here.
Gallup
Providence-metro ranks at the bottom for job creation in 2014
Rhode Island has been ranked amongst the worst in job creation, according to a recent survey done by Gallup.
Gallup gives the Prov-metro area an index score of 23, the lowest score is the New York- New Jersey area with 20.
Salt Lake City, Utah and Austin-round Rock, Texas rank the highest with a score of 37.
See the rest of the rankings here.
Forbes
The 2014 state rankings by Forbes has just been released and Rhode Island moved up two spots from #48 in 2013 to #46 in 2014.
What does Forbes say about RI's business environment"
After Michigan and Illinois, Rhode Island has experienced the third worst net migration out of its state in the country over the past five years. With a recent unemployment rate of 7.6%—lower than only Georgia and Mississippi—residents are leaving the state in search of jobs. Rhode Island has been stuck in the bottom five overall for six straight years. One plus: labor costs are 5% below the national average, which stands out in the expensive Northeast.
Tax Foundation
Findings from The State Business Tax Climate Index were released this morning by Tax Foundation which found Rhode Island to have the 45th best tax climate for businesses for 2015. The state's rank has not changed since last year after The Index analyzed 100 different tax variables in multiple categories.
Read more about the report here
WalletHub
After conducting an online suvery consisting of 1,050 individuals from both parties across the nation, WalletHub ranked Rhode Island as having America's 33rd fairest tax system.
Click here to view the poll's entire findings
Thumbtack/Kauffman
Providence is the second worst city in America for small business, according to a new survey conducted by Thumbtack.com and the Kauffman Foundation.
More than 12,000 small businesses in 82 cities across the country participate in the survey. Providence received an overall "F" grade for small business friendliness.
The Economist
Small Business Friendliness Grade: F
The Economist grades states on an A+ to F grading scale for its small business climate. Rhode Island is one of just 6 states to earn an "F" grade.
Overbearing bureaucracy and excessive licensing is stifling small business in America.
Read More About The Economist Grade Here
CNBC
CNBC ranks each state in cost of doing business, economy, technology and innovation.
Rhode Island's unemployment rate as of May 2014 was 8.2 percent. This is RI's lowest unemployment rate since August 2008.
Read More About CNBC Ranking Here
Forbes
Forbes ranks each state in business costs, economic climate, and growth prospects. RI is third worst in 2013.
The most damning in the commentary:
After Michigan, Rhode Island has experienced the second worst net migration in the country over the past five years.
Read More About Forbes Ranking Here
ChiefExecutive.net
#39 ChiefExecutive.net
ChiefExecutive.net ranks each state in taxations and regulations, workforce quality, and living environment.
The most damning in the commentary:
Sky-high unemployment rate bespeaks continuing terrible business climate.
Read More About ChiefExecutive.net Ranking Here
Tax Foundation
#46 Tax Foundation
Tax Foundation ranks each state in corporate tax rank, sales tax rank, and unemployment insurance tax rank.
Rhode Island and the other states in the bottom ten suffer from the same afflictions: complex, non-neutral taxes with comparatively high rates.
Read More About Tax Foundation Ranking Here
Wallet Hub
#24 Wallet Hub
Wallet Hub ranks each state in ROI rank, state tax rank, and overall government services.
Rhode Island ranked #50 for worst roads and bridges, but ranked #4 in safety.
Read More About Wallet Hub Ranking Here
ALEC
#47 ALEC
ALEC ranks each state in economic performance and outlook.
Although Rhode Island 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.
Read More About ALEC Ranking Here
Kauffman Foundation
#50 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.
Read More About Kauffman Ranking Here
Free Enterprise
#47 Free Enterprise
Free Enterprise ranks each state in performance, exports, innovation + entrepreneurship, business climate, talent pipeline, infrastructure.
Rhode Island has continued to feel the direct impact and ripples from the recent recession—it ranks 47th overall in economic performance. However, positive rankings of 15th in talent pipeline and 16th in innovation and entrepreneurship suggest the existence of a foundation on which to build the future.
Read More About Free Enterprise Ranking Here
The Pew Charitable Trusts
#40 The Pew Charitable Trusts
The Pew Charitable Trusts ranks each state in job growth and job creation.
Rhode Island added 6,223 jobs in 2014.
Read More About The Pew Charitable Trusts Ranking Here
Gallup
10th Worst in Gallup's Annual Ranking of State Job Markets 2014
Rhode Island has been ranked 10th worst for job creation in Gallup's annual ranking of state job markets in 2014 with a job creation index number of 21
Rhode Island is one of two (Connecticut) states to rank in the bottom ten each year since 2008.
The 2014 State level findings have were drawn from 201,254 interviews with employed adults across the nation.
See the full list of rankings here.
