Money

These are the best and worst states for middle-class Americans

The economy may be strengthening, but affordability remains a concern for many middle-class Americans – in some states more than others. In a new study from GOBankingRates researchers found that South Dakota is the best place for middle-class individuals to live. The state has a college graduation rate of more than 48 percent, while in-state tuitions and fees for the 2017-2018 school year were about $8,450. The median list price for a home was $229,500 and the home ownership rate is about 69 percent. Iowa was ranked second among the top destinations for individuals earning an average income. Home values in this state have increased 3.9 percent since 2013, while the median list price is about $181,900. The number of middle-class households in Iowa, however, has declined by more than 2 percent over recent years. Florida, which has no state income tax, is next on the list of best states for the middle class. As of 2014, the average resident considered to be a part of the middle class was earning about $70,100. In-state college tuition costs $6,360, on average, down 4 percent over the past five years. Wyoming and Mississippi ranked fourth and fifth, where the average individual belonging to the middle class earns about $75,800 and $71,400, respectively. Also in the top 10 were Nebraska (6), West Virginia (7), North Dakota (8), Washington (9) and Idaho (10). On the other hand, Hawaii was found to be the worst state for middle-class Americans. Middle-class income in the state has declined by more than 3.6 percent throughout recent years, while home values have risen by 6.8 percent. Louisiana occupied the second spot on the list of worst states for the country’s middle class, where the cost of in-state college tuition has risen 48 percent over the past five years. Alaska followed Louisiana, a state with a college graduation rate of just 32 percent. Connecticut ranked fourth, where the median list price of a house was about $325,000 and the cost of in-state tuition has risen 20 percent over the past five years, to $12,390. Rounding out the top 10 are New York, Massachusetts, New Jersey, Virginia, California and Colorado. GOBankingRates’ study examined a range of different factors in order to determine which states are best, and worst, for the middle class, including change in median household income over time, change in the number of households earnings middle class income, college graduation rates, the cost of in-state tuition and median home values, among other factors.

Consumer Confidence Rises Toward 18 Year High Again

The confidence of American consumers is riding higher. Consumer confidence rose by more than expected in July, according the Conference Board. The consumer confidence index rose to 127.4 in July, four-tenths of a percentage point above expectations. June’s reading was revised up from 126.4 to 127.1, indicating confidence was even stronger in June than previously thought. While the July reading was below the recent high of 130 it is very high by historical standards. “Consumers’ assessment of present-day conditions improved, suggesting that economic growth is still strong,” said Lynn Franco, Director of Economic Indicators at The Conference Board.“However, while expectations continue to reflect optimism in the short-term economic outlook, back-to-back declines suggest consumers do not foresee growth accelerating.” That’s likely an accurate assessment. The economy grew at a 4.1 percent pace in the second quarter, the highest level since 2014. It’s unlikely to accelerate to an even higher growth rate in the remainder of the year. Consumers views of current conditions improved further in July. Just 10.1 percent say business conditions are “bad, down from 11.5 percent a month earlier. Those business conditions are “good” rose to 38.0 percent from 37.2 percent. The view of the labor market was also improved. Those claiming jobs are “plentiful” increased to 43.1 percent from 40.4 percent. Only 15 percent describe jobs as “hard to get”—unchanged from June.

More great economic news in this Trump economy!!    🙂

How the new tax law creates a ‘perfect storm’ for Roth IRA conversions

For years I’ve lectured about the wonderfulness of Roth IRAs. While the new Tax Cuts and Jobs Act (TCJA) includes one negative change for Roth IRAs, they are still pretty wonderful. Here’s what you need to know about Roth IRAs and especially Roth IRA conversions in the post-TCJA world. Unlike traditional IRA withdrawals, qualified Roth IRA withdrawals are federal-income-tax-free and usually state-income-tax-free too. What is a qualified withdrawal? It’s one that is taken after you, as the Roth account owner, have met both of the following requirements: 1. You’ve had at least one Roth IRA open for over five years. 2. You’ve reached age 59½ or become disabled or dead. For purposes of meeting the five-year requirement, the clock starts ticking on the first day of the tax year for which you make your initial contribution to your first Roth account. That initial contribution can be a regular annual contribution, or it can be a conversion contribution. For example, say your initial Roth pay-in was an annual contribution made on 4/1/14 for your 2013 tax year. The five-year clock started ticking on 1/1/13 (the beginning of the tax year for which the contribution was made), and you met the five-year requirement on 1/1/18. Unlike with a traditional IRA, you don’t have to start taking annual required minimum distributions (RMDs) from Roth accounts after reaching age 70½. Instead, you can leave your Roth account(s) untouched for as long as you live if you wish. This important privilege makes your Roth IRA a great asset to leave to your heirs (to the extent you don’t need the Roth money to help finance your own retirement). Annual Roth contributions make the most sense for those who believe they will pay the same or higher tax rates during retirement. Higher future taxes can be avoided on Roth account earnings, because qualified Roth withdrawals are federal-income-tax-free (and usually state-income-tax-free too).

For more, click on the text above.

Trump could deliver a second tax cut — without having to deal with Congress. Here’s how

What if President Trump had the authority—on his own—to enact a second powerful tax reform? He does. The momentum is building for him to use it. In the halls of Congress, the corridors of the administration, and the nerve centers of activist groups, forces are aligning behind a plan: a White House order to index capital gains for inflation. It’s a long-overdue move—one that would further unleash the economy and boost GOP election prospects. And Mr. Trump could be the president bold enough to make it finally happen. At President Reagan’s behest, Congress in the 1980s indexed much of the federal tax code for inflation. Oddly, capital gains weren’t similarly treated. The result is that businesses and individuals pay taxes on the full nominal amount they earn on investments, even though inflation eats up a good chunk of any gain. It’s not unheard of for taxes to exceed real gains after inflation. The result is significant capital distortion, as companies sit on buildings and property or investors sit on stock—rather than selling and thereby putting both assets and gains to more productive use. Conservatives have understood this problem for decades, yet for decades they have been held hostage to a 1992 government brief. The paper by the Justice Department’s Office of Legal Counsel offered a few faulty arguments as to why the Treasury lacked the authority to make this regulatory change. Neither President Bush questioned it, but others have.

To read the rest of this outstanding op/ed by Wall Street Journal editor Kimberley Strassel, click on the text above.  President Trump really needs to take her great advice.  She’s right.  He’s the only president bold enough to make such a move.  And, it’d be the right one.  Excellent!!     🙂

Feds Collect Record Taxes in First Month Under Tax Cut; Run Surplus in January

The federal government this January ran a surplus while collecting record total tax revenues for that month of the year, according to the Monthly Treasury Statement released today. January was the first month under the new tax law that President Donald Trump signed in December. During January, the Treasury collected approximately $361,038,000,000 in total tax revenues and spent a total of approximately $311,802,000,000 to run a surplus of approximately $49,236,000,000. Despite the monthly surplus of $49,236,000,000, the federal government is still running a deficit of approximately $175,718,000,000 for fiscal year 2018. That is because the government entered the month with a deficit of approximately $224,955,000,000. The $361,038,000,000 in total taxes the Treasury collected this January was $11,747,870,000 more than the $349,290,130,000 that the Treasury collected in January of last year (in December 2017 dollars, adjusted using the Bureau of Labor Statistics inflation calculator). The Treasury not only collected record taxes in the month of January itself, but has now collected record tax revenues for the first four months of a fiscal year (October through January). So far in fiscal 2018, the federal government has collected a record $1,130,550,000,000 in total taxes. However, despite the record tax collections so far this fiscal year, and despite the one-month surplus in January, the federal government is still running a cumulative deficit in this fiscal year of $175,718,000,000. That is because while the Treasury was collecting its record $1,130,550,000,000 in taxes from October through January, it was spending $1,306,268,000,000. The levels of federal taxes and federal spending fluctuate from month to month, and it is not unusual—but not always the case—for the federal government to run a surplus in January. Over the last twenty fiscal years, going back to 1999, the federal government has run surpluses in the month of January 13 times and deficits 7 times.

Hostess employees get a year’s worth of free Twinkies and Ding Dongs as a bonus

On January 31, Hostess Brands Inc. announced that not only would their employees receive monetary bonuses this year, but that they would also get a year’s worth of free baked goods! After enacting tax legislation, Hostess will be rewarding its 1,036 bakery and corporate employees bonuses of $750 in cash, a 401(k) contribution of $500, and a year’s worth of free product. “The recent tax reform changes have given us the opportunity to review our benefit and compensation structure with an eye toward further investing in our workforce — our extraordinary team of employees who have and continue to help make Hostess so successful,” said executive chairman C. Dean Metropoulos in a press release by the baked goods brand. “As we have done in the past, the company’s management and board take great pleasure in sharing the company’s success with our employees.” No, employees will not have to fill their cars with a year’s worth of Twinkies and Ding Dongs. On a weekly basis, a representative from each bakery location will choose a “product of the week” for the bakery and all eligible employees will be able to take home one multi-pack of the chosen item every week for an entire year.

🙂

U.S. Service Sector Hits 13-Year High

The U.S. service sector picked up momentum in January, reversing a slowdown at the end of 2017. The Institute for Supply Management on Monday said its nonmanufacturing index rose by more than four points to 59.9 in January, a far stronger reading than the 56.6 expected by economists. In December, the index slipped to 55.9. January’s figure is the highest in 13 years. A reading above 50 indicates that non-manufacturing business is expanding, while a reading below signals contraction. The survey tracks the performance of service-oriented companies, such as banks and restaurants, as well as real estate and construction. Fifteen of the 18 business sectors tracked by ISM experienced growth in January. ISM’s gauge of non-manufacturing employment rose to an all-time high of 61.6, up from 56.3 in December. Its index of new orders surged 8.2 percentage points to 62.7. The survey shows that the economy is off to a strong start in 2018.

Indeed!!   🙂