State Budget: Stornger Now and Into the Future

Good News! Following the release of the November 2005 Economic Forecast, Minnesota's financial outlook is strong with projected surpluses for the 06-07 and 08-09 bienniums. Although many wanting to raise citizen taxes proclaimed gloom and doom just 5 months ago, the forecast clearly shows that by controlling expenditures and encouraging business growth the state could and would be in a stronger position moving forward.

Tax revenues were up in the state's 3 largest revenue funds: Income, Sales and Corporate Taxes. Probably the best sign was the 10.9 percent growth in Corporate Taxes (+$165 million) combined with the state's low unemployment rate of 3.7 percent well under the U.S. average of 5.1 percent. As REALTORS®, the most important factors for a strong residential market is job stability and population growth.

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You and Your Money

• IRS Enforcement and Revenues Increase - Commissioner Mark Everson says audits will increase in 2006, especially on taxpayers earning $100,000 or more.
• Your maximum 401K contribution for 2005 is $14,000, which will increase in 2006 to $15,000. If you are 50 years or older you will be able to save an additional $5,000 in 2006 - for a total of $20,000.
• Talking Taxes - Social Security taxes for self-employed individuals is calculated on the first $90,000 in earnings for 2005. That rate is 12.4%, plus you have another 2.9% on all income for "Medicare."
• FHA Mortgage Benefit - In a Meeting with the Minnesota REALTORS® Executive Committee, Minneapolis HUD Officials brought up a benefit consumers can utilize if they have an FHA mortgage. If a mortgage holder loses their job and is not in a position to make house payments, FHA will defer up to one-year of house payments (PI, not taxes and insurance) so the person can either find a new position or sell the home. This is a good reason for some individuals to consider an FHA loan.

Political Contributions Increase

According to an article in the Wall Street Journal, roughly 43% of small business owners make financial contributions to PACs or campaigns. About 53% say they contribute under $1,000, with about half of those giving over $250.

The primary reason for involvement in politics is to improve their own local area, state or county. The second most common reason, at 16%, is a personal interest in politics; followed by protecting or promoting their own business interests (14%), and the desire to deal with a particular problem at 11%.

Owners have a split view about politics and its impact on their businesses. Most owners, 67%, believe that being active in public affairs can generate business, but 51% also say that being too closely connected to politics can be bad for business.