No Tax Break for New Jersey
New Jersey Senate President Stephen Sweeney wants to create a new 3% tax surcharge on businesses with more than $1million in net income, reports Bloomberg News. The surcharge would generate an additional $657 million for the state, according to the lawmaker.
Rivaling Sweeney’s proposal, newly elected Democrat Governor Phil Murphy is proposing a new tax on millionaire residents. Murphy also is proposing new taxes on retail sales, Internet transactions, ride-sharing services, online-room booking, marijuana (if he succeeds in legalizing recreational use), and e-cigarettes.
The Governor’s millionaire tax would increase the tax rate on personal income above $1million from its current 8.97% to 10.75% — still a bargain compared to California.
In what will likely become talking points for many states, Sweeney explains that his bill would recapture a share of the federal corporate tax cut “that is being financed on the backs of taxpayers in New Jersey and other high tax states.” People in New Jersey got hurt by the “tax cut of last year’s change in the federal tax code. Corporations got major windfalls,” he said.
Over the years, Sweeney has perennially sponsored his own millionaire’s tax on individuals only to have it vetoed seven times by then Governor Christie who was termed out of office last year. But, with the new federal tax law that limits state and local tax deductions to $10,000, Sweeney now wants to target businesses instead, apparently believing that a new tax on millionaires could drive wealth from the state. New Jersey already has the nation’s highest property taxes.
As for the new governor’s plan to raise the state sales tax, he may want to check a bit of state history. The last two governors to raise the sales tax were Jon Corzine and James Florio. Both were ousted after just one term, according to Bloomberg.
The Bitcoin Regulatory Squeeze
Investors should “think long and hard” before jumping into an initial coin offering (ICO), SEC Chairman Jay Clayton told FOX Business. His warning comes as Telegram, an encrypted messaging app company, has broken the record for the biggest ICO campaign of all time. The company has raised more than $850 million in the first two months of fundraising – out of what is expected to be a $2 billion ICO, reports FOX.
“I worry in particular about people who see things that look like a New York Stock Exchange or NASDAQ listing for ICOs or cryptocurrencies and think that I’m getting the same protection for my token that I would be getting for a share of stock that trades on an exchange,” Clayton said. “They’re not.”
Clayton and his team are examining whether a number of ICOs are violating securities laws, telling FOX Business: “Many ICOs and many of the ones I’ve looked at specifically are securities. For some reason, people selling ICOs seem to think they don’t need to follow either path; they seem to think they can have the best of both worlds: a limited disclosure from a private placement and public trading and public offering of the token.”
Clayton also voiced concerns about how ICOs raise capital. “We have seen instances where companies seem to have had trouble raising money in a traditional private placement and then have switched to an ICO in order to raise the money,” he said. “The business hasn’t changed substantively, but it’s a form-over-substance way to raise money. That is troubling.”
“It’s important to understand that the fundamentals of our securities laws do apply in this space,” Clayton said. “It’s a technology with great promise. It’s a technology that I really think is pretty cool and can change the way people do business at a great deal of efficiency, but it doesn’t mean that you can obviate our tried-and-true approach to the federal securities laws.” Anyone or any company that tries to skirt the rules will be dealt with by the SEC. “Abide by the law,” Clayton warned. “We are watching. Others are watching.”
Source: Fox Business
Regulatory Relief: Slower but still moving
“Modernizing the rules without in any way taking away investor protection is the best thing that we can do,” SEC Chairman Jay Clayton told CFO Journal. “The SEC is looking at all rules to see what could be pruned back,” he said.
“The SEC’s incremental progress stands in contrast to the early days of the Trump administration, which were punctuated by a swift succession of executive orders aimed squarely at deregulation,” reports CFO Journal, noting that one order told regulators that any new rule would require the elimination of two old rules, while another called on the Treasury Department and Congress to roll back the Dodd-Frank financial overhaul law.
Although only Congress can change or repeal laws, including Dodd-Frank and Sarbanes-Oxley, the SEC wields a lot of power by its interpretation of those laws, the rules it writes, and by its enforcements. In that regard, the SEC continues to act in several ways to cut red tape.
In one example, the SEC is currently considering raising the definition of a smaller reporting company to those with a float of less than $250 million, up from the current $75 million – thus reducing disclosure requirements and compliance costs for those smaller companies.
Good news for Household Income
Thanks to the new tax law allowing reduced pay check withholdings, along with several companies sharing their tax savings via worker bonuses, U.S. household income is up significantly. After-tax income, including earnings from salaries, investments and other sources, rose 0.9% in January from December, according to the Commerce Department.
Bad news for Smaller Banks
The charge-off rate, or the share of outstanding card balances written off as a loss after consumers failed to pay, rose to 7.2% in the fourth quarter, up from 4.5% a year ago, according to Federal Reserve data.
Though still historically low, the percentage of charge-offs have recently been increasing overall, but it is especially surging at smaller banks, where the average charge-off rate is near an eight year high.
Americans now owe an all-time high of more than $1 trillion in credit card debt after adding $92.2 billion in 2017, according to a new study by the personal finance website WalletHub. “Only four times in the past 30 years have we spent so much in a year,” notes the study.
Possibly some good news, however, is that consumer borrowing slowed with the start of 2018. Last January’s gain of $13.9 billion was the smallest monthly increase in three years, following a $19.2 billion increase in December 2017 and a November 2017 surge of $30.9 billion, according to the Federal Reserve data reported by ABC News.
Good news for Mortgage-backed Loans
The delinquency rate for commercial mortgage-backed securities dropped again last month, according to real estate data provider Trepp Inc. February’s delinquency rate of 4.51% represents the eighth straight month of delinquency decline, and the rate is now well below its high of 10.34% recorded in July of 2012.
The good news comes as a surprise as delinquencies were expected to increase due to the large number of now maturing mortgage-backed securities that were packaged in 2006 and 2007. Thanks to rising real estate values, low interest rates and lots of available debt capital, property owners have been able to refinance and restructure debts, according to Trepp.
Bad news for Car Buyers
Despite a better overall economy, rising interest rates and tighter credit conditions have slumped auto sales. U.S. vehicle sales dropped 2.4% in February to 1.3 million, according to Autodata Corp.
But there may be some good news ahead. General Motors’ chief economist, Mustafa Mohatarem, told the WSJ that the broader economy could lend the industry a hand as the year rolls on. “The impact of tax reform and tax refunds aren’t being felt fully by consumers yet. We expect consumer spending to pick up as tax cuts are reflected in pay checks.”
Good news for the Jobless
The Labor Department last week reported that the jobless rate remained at 4.1% for February, marking the fifth straight month at that level. “The U.S. economy enjoyed the biggest hiring spree since mid-2016 as workers streamed in from the sidelines of the labor force,” reported Bloomberg.
Earlier, the Labor Department reported that the number of new applications for unemployment benefits continues to decline, noting that it now hovers at its lowest level since December of 1969.
Flashback – 1969: The Rolling Stones top the charts with Honky Tonk Women. Best Picture Oscar went to Midnight Cowboy. Gunsmoke and The Brady Bunch were playing on the tube. (Yes it really was a tube, no pixels). Many viewers were awed by their new color TV sets. (It was just four years earlier that commercial networks first aired the majority of their prime-time shows in color). And on July 20th, the whole world paused as American Astronaut Neil Armstrong walked on the moon.
A Tax Accountant meets with a client:
I’ve just completed reviewing your tax projections for this year and I have good news and bad news for you.
What’s the good news?
The new federal tax bill has been signed into law. The Corporate Tax Rate has been cut to 21%; pass-through businesses are getting a big tax cut too; Individual tax brackets are now more generous; the Standard Deduction, the Child Care Credit and the Federal Estate Tax Exemption have all been doubled!
That’s fantastic! So what’s the bad news?
The bad news is you live in New Jersey — all your federal tax savings and more will be going to the state!