Thompson Research Group’s Post

The “return to normal” for state budgets — and by extension, K-12 funding — that has been predicted for years is starting to become a reality, new fiscal data shows. As fiscal year 2024 wound to a close this summer and states reported their actual tax collections, the more modest picture that revenue forecasts outlined came into focus. Most states saw revenues align closely with their projections, according to an analysis by the National Association of State Budget Officers. That’s newsworthy after the last couple of years, when many states reaped higher revenues than expected, bolstered by billions of dollars in federal pandemic aid, and inflation. https://lnkd.in/gTXzZGU2

Key State revenues were 2.6% ahead of expectations in August, but that outcome was entirely due to interest on State cash holdings. Those cash holdings have been supported in part by higher interest rates and State holdings of federal funds, which are both likely temporary. Read more in NHFPI’s review of these revenues here: https://lnkd.in/eurWKVnm 

💲 OKLAHOMA REVENUE: FY 2025 GRF collections align with both estimate and prior year, less than 1% variance General Revenue Fund collections in September totaled $746.1 million, which is $8.4 million, or 1.1%, above the monthly estimate. This is $28.3 million, or 3.7%, below collections in September 2023. Total GRF collections for the first three months of fiscal year 2025 are $1.97 billion, which is $4.8 million, or 0.2%, above the estimate, and $17.4 million, or 0.9%, below prior year collections for the same period. 📢 "Overall, through the first quarter of the fiscal year, the state's General Revenue Fund is slightly ahead of estimates," said OMES Director Rick Rose. "Gross production tax contributions to the General Revenue Fund continue to fall well short of the estimate, but have been offset by outperformance in contributions from other sources. Oklahoma’s state grocery tax elimination launched at the end of August, and we expect to see the first full month of that elimination reflected in next month’s results." 📰 READ THE FULL PRESS RELEASE: https://lnkd.in/gDf9VT9x ℹ️ As state government’s main operating fund, the GRF is the key indicator of state government’s fiscal status and the predominant funding source for the annual appropriated state budget.

For Federal Budget nerds like me out there, I offer the following without policy prescription, but note that the deficit is daunting. Pulled this from the FY25 PBR and rounded the numbers for simplification. FY24 - Federal Spending ~$7T Discretionary Spending (appropriations): ~0.9T Defense ~1.0T Non-Defense (all other fed agencies) Mandatory Spending: ~1.4T Social Security ~0.8T Medicare ~0.9T Other Mandatory (eg VA Disability, Fed retirement, etc) ~0.6T Medicaid ~0.5 Means-tested payments (eg EITC, Food Stamps) ~0.9T Interest on the Debt FY24 - Federal Receipts ~$5T ~2.5T Individual Income Taxes ~0.6T Corporate Taxes ~1.7T SS/Medicare Taxes ~0.2T Other Taxes (Estate taxes 35B, Excise taxes 97B etc) Annual Deficit ~$2T

The IRS recently published its annual data on the migration of taxpayers and adjusted gross income (AGI) between states. California ranked, again, as the biggest income loser ($23.8 billion) in 2022, followed by New York ($14.2 billion), Illinois ($9.8 billion), New Jersey ($5.3 billion) and Massachusetts ($3.9 billion). The top gainers were Florida ($36 billion), Texas ($10.1 billion), South Carolina ($4.8 billion), Tennessee ($4.7 billion) and North Carolina ($4.6 billion).

Spring budget - hopefully this post doesn't crash LinkedIn like last night's activity! Previously, I stated the following topics where going to be discussed, here I put the resulting outcomes next to each topic: 💰 Income Tax and National Insurance potential cuts, albeit with the thresholds frozen, fiscal drag is still attacking earnings 💬 06/03/24 - National Insurance cut 2p per pound for the self-employed and employees. Now, a tax cut is always welcome but the effect of stagnant thresholds means fiscal drag is still attacking earnings. 👴 Inheritance Tax potential adjustment, although unlikely as this may seem a favour to the rich which may not encourage voters. 💬 06/03/24 - No change as expected by those in my industry. 👪 A long overdue discussion on Child Benefit thresholds, aimed at assisting single parent households 💬 06/03/24 - Thresholds increased to £60,000 for full benefit, and partial benefits up to £80,000. A welcome change. 🏠 Lifetime ISA, since this was launched in 2017, house prices have increased some 29% meaning the current limits are causing issues 💬 06/03/24 - No change to the Lifetime ISA, although there is a new £5,000 additional ISA allowance for "UK Equity investments" - there is some ambiguity about what constitutes this type of investment and if a regulated financial planner can advise. More to follow.. 🃏 Wildcard? With the election in sight, public opinion will be the focus, what else could he change? 💬 06/03/24 - The small rise in the VAT threshold for small business from £85,000 to £90,000. A win is a win I suppose...

I am an incurable optimist. I see the silver lining in most situations. Take this morning. I saw this 👇 And my first thought was: the issue I am campaigning for made the front page of a national newspaper. 😃 This is a good thing. The more the issue is debated, and its profile becomes prominent the higher the chances things will change sooner rather than later. Because despite what Jeremy Hunt has apparently decided to do (or rather not do), I am 1️⃣ 0️⃣ 0️⃣ % convinced of one thing: it is not a matter of if, but when the Child Benefit 👨👩👧👦 rules will be reformed. And there is another bright side in this ‘negative’ headline: they are not disputing that a reform should take place. Finally, their two lines of defense are so weak that will soon fail! Line of defense number 1: it is not affordable. False! According to the FT, raising the income threshold before imposing the High Income Child Benefit Charge (HICBC) to £70k as per our petition costs £2bn. Last year’s NIC cut costed £9bn. So there are money when you want to spend them. Also, about 50% of these 2bn will be immediately recovered by the Treasury as families will spend the Child Benefit payments in the economy hence incurring #vat and increasing corporate profits, which in turn will boost tax receipts. Line of defense number 2: we want to prioritise #tax cuts. This already contradicts the first line of defense as tax cuts cost money. So how come reforming Child Benefit is not affordable and cutting taxes is? Again, there are money when you want to spend them… Besides this, reforming #childbenefit is a tax cut! The way the HICBC is collected is through taxation! If you increase the income threshold or remove the HICBC altogether you are cutting taxes! In conclusion, keep your faith high my friends: change is coming! 😉 And don’t forget to sing and share the petition: https://lnkd.in/dcK3KB_g

A Year from Now You May Wish You Had Started Today Investing in Municipal Bonds (munis) for Tax-Exemption In a time of rising interest rates and potential tax increases, the appeal of municipal bonds for investors is on the rise. These tax-exempt bonds are gaining popularity as individuals seek ways to minimize their tax liabilities. MacKay Shields LLC, a renowned investment firm, highlights the attractive nature of these bonds due to their tax benefits. Tax Efficiency for Savers and Investors With higher interest rates prevailing, savers are facing steeper tax bills. On top of that, individual tax cuts could soon expire, compounding the tax burden. By investing in municipal bonds, investors can benefit from the tax-exempt status provided by these securities. This feature allows individuals to mitigate their tax obligations, resulting in potentially greater savings and returns. Expert Insight from Bob DiMella Bob DiMella, co-head at MacKay Shields LLC, stresses the increasing relevance of municipal bonds in today's investment landscape. As investors seek tax-efficient investment options, munis stand out as a favorable choice. DiMella's expertise and experience add weight to the argument for considering municipal bonds as part of an investment strategy aimed at reducing tax liabilities. Take Action Now to Avoid the Fear of Missing Out! Don't miss out on the opportunity to optimize your investments and reduce your tax burdens. Start researching and exploring municipal bonds as a tax-efficient investment option within your Health Savings Account (HSA). Act now to secure your financial future and ensure your healthcare needs, family's well-being, and overall wellness are well-provided for. Invest wisely, save on taxes, and grow your HSA for a healthier and wealthier tomorrow! 🌱💼📈💪 #HSA #investing #healthcare #health #family #wellness

Everyone needs some level of cash, and that number varies from person to person. For those with higher levels of assets, it can be possible to have too much cash which would be better off invested. We’ve seen people with $100k, $250k, $500k, or even over $1 million in cash which is likely way too much, even if it’s in a high-yield account or CD. Over time, cash will not perform as well as invested dollars. Right now there are places where cash can earn over 5%, but this is still lower than market returns of 8% to 10% or more. Also those 5% yields will be coming down as interest rates decline. We know there’s people out there who wait to time the market and invest their cash right at the bottom, but that generally doesn’t work out. From a tax perspective, cash produces interest which is taxed at a higher rate than investment income like dividends or capital gains. When interest is taxed at 10% or 12%, investment income would be taxed at 0%, and when interest is taxed at 22%, 24%, or 32%, investment income would be taxed at 15%. Not only is cash taxed at a higher rate, but its entire return is reportable as income every year, there’s no appreciation with cash. For example, if you have $500,000 of cash earning 5% for a total of $25,000, that entire $25,000 is reportable as interest income that year. If instead that $500,000 was invested in equities earning on average 8% made up of 2% dividends and 6% appreciation, you would only need to report the 2% dividend income of $10,000 as long as nothing is sold. This flexibility keeps your tax bill down but also reduces the chance of triggering AGI related issues like the net investment income tax or additional Medicare premiums. If you’re in the 4th tax bracket with an 8% investment return of $40,000, you’re only paying $1,500 in federal taxes from the dividends, plus $930 in state taxes if you’re in California. Comparing that with your 5% cash return of $25,000, you’d pay $6,000 in ordinary income taxes, $2,325 in state taxes, plus potentially an extra $570 net investment income tax, and/or another $3,000 in extra Medicare premiums. Now that 5% yield becomes 2.6% after tax while the invested dollars return 7.5% after tax. Investing can be volatile in the short-term, but over time it is a much better option than hoarding cash. #cash #assets #Investing #tax #equities #premiums

That was an eventful 90 minutes. Another 2% reduction in NIC. At one point there I thought he was going to do something a bit more exciting. Non-dom status to go. I'm looking forward to seeing the detail on this one and what impact it will have on IHT and the planning that is already in place. CGT rate on residential property dropping to 24% was an odd one. I don't recall having too many conversations with clients who have been put off by that extra 4%. FHL also gone. That's an exam question that will need to be replaced! High Income Benefit Charge, abatement threshold up to £60,000 with a review to follow. The threshold hasn't changed since this first came in by the way. Multiple Dwelling's Relief to also go. If you have any questions following todays budget please get in touch with one of our tax specialists at Azets #budget2024 #domicile #nic #azets