Compliance December 3, 2007

MI Legislation Imposing Service Tax on Advice is Repealed

Michigan Governor Jennifer Granholm signed repeal and replacement legislation that would end a new tax on many services, including financial advice.
Reported by

The Detroit Free Press reports the agreement to repeal the 6% tax on some services and replace it with a surcharge on the state’s main business tax came just two months after it was enacted as part of the October 1 deal to address the state budget crisis, but not in time to beat the December 1 effective date. The legislation calls for amnesty and rebates for taxpayers who end up paying the service tax before it is officially removed from state law.

The surcharge will increase business taxation about $750 million a year, replacing the revenue expected from the service tax, the Free Press said. The 21.99% surcharge on the state’s new business tax goes into effect January 1.

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Oakland County Executive L. Brooks Patterson said in the news report the service tax might be gone, but he predicts more discord is to come.

In October, the Investment Company Institute (ICI) issued a statement strongly urging the state of Michigan to repeal the legislation (See ICI Pleads for Repeal of MI Legislation Taxing Investment Advice Services).

Data & Research December 3, 2007

U.S. Financial Jitters Results in Retirement Savings Reduction

Just over one in 10 American workers (11%) said they plan to cut back their retirement plan contribution rate as part of a general belt-tightening during the holiday season.
Reported by

The retirement deferral reductions were one apparent reaction to Americans’ sense that the economy is either in a recession or could be in one soon, according to the latest Principal Financial Well-Being Index. A Principal news release said 71% of workers and 72% of retirees held that view about a U.S. recession. More than one-third of workers (37%) expressed concern about their own job security.

Other anticipated financial cutbacks, according to the survey announcement, included:

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  • 29% of workers and retirees indicated they plan to spend less money than last year on holiday presents;
  • more than three-fourths of workers (76%) and 49% of retirees said they would eat out less often;
  • both workers and retirees said they would cut back on buying clothing and consumer goods (69% of workers and 49% of retirees);
  • almost two-thirds of workers (63%) and more than one-third of retirees (39%) said they would reduce entertainment, such as going to movies and concerts.

“Uncertainty about the direction of the economy clearly is top of mind as Americans navigate the holiday shopping season, which has turned into a gift giving extravaganza,” said Dan Houston, executive vice president of Retirement and Investor Services, The Principal, in the news release.

The Index, which surveys American workers at growing businesses with 10 to 1,000 employees, is released each quarter by the Principal Financial Group and conducted by Harris Interactive.

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