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Westlake Legal Group > Posts tagged "Budget"

Brexity Hezza and Lawsony Javid

“The Treasury as an institution should be the engine that drives this new agenda,” Sajid Javid told the Commons yesterday during his resignation statement.  Those words matched others reported earlier this month on ConservativeHome: “The Treasury fights back. How it plans to drive radical reform – and become “the Government’s internal think tank”, we reported.

The story and the former Chancellor’s view will have gone down badly in Downing Street, not least with Dominic Cummings.  It offers a broader context in which to see his resignation.  Thus was not simply the consequence of a row about Special Advisers.  Rather, it was about their place in a broader Treasury team that had aspirations to drive this Government.  In particular, Javid did not see eye to eye with Boris Johnson about public spending.

So in retrospect, the former’s resignation is less surprising than it seemed at the time.  We believe that Javid had no choice but to quit, given the ultimatum offered him – and are dubious about merging Number Ten and the Treasury at the top.  It is in the nature of Number Ten to want to spend taxpayers’ money, especially under this “Brexity Hezza”, and in that of the Treasury to want to restrain the flow.  Which is as it should be.

But the second can’t drive the first. “Two stars keep not their motion in one sphere, / Nor can one England brook a double reign / Of Boris Johnson and Sajid Javid”, as Shakespeare almost put it.  Or read “Downing Street and the Treasury” if you prefer.  At any rate, the choice that the latter must now make is one of those that are simple, but not easy.

First, he can decide to bend the knee, and take his cue from the parts of his statement yesterday that praised the Prime Minister and his successor.  That means keeping a low profile; popping up now and again to make supportive statements when these will count, and hoping that, like Penny Mordaunt, James Brokenshire and John Whittingdale in the last reshuffle, he can return to government in the next one.

Second, he can plant the standard of rebellion by becoming the spokesman for a cause.  It’s not hard to see what this could be. “I am a proud, low-tax Conservative, and I always will be. Already, our tax burden is the highest it has been in 50 years,” he told the Commons yesterday.  “The fiscal rules that we are elected on are critical.”  If Johnson is a Brexity Hezza, the former Chancellor could aim to be a Lawsony Javid.

Third, he could decide that he’s had enough and, after a decent pause, leave the Commons at the next election and go off to make more money.  If Family Javid wanted him to do so, one could scarcely blame them.  We hope he doesn’t.  There is a gap in the Tory market for a free market champion and, for all his stress on social mobility during last year’s leadership election, dry economics has always seemed to us what suits him best.

Javid is unlucky in his timing.  The impact of the coronavirus will mean that the Budget should legitimately be even more expansionary than would otherwise have been the case (given Brexit).  It is against the normal rules of the political cycle not to load the nasty stuff – tax rises – into the first Budget of a Parliament.  But as in so many aspects of political life, Boris Johnson stands ready to break the rules.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Andy Street: My West Midlands shopping list for the Chancellor’s first Budget

Andy Street is Mayor of the West Midlands, and is a former Managing Director of John Lewis.

As Mayor of the West Midlands, I have learnt that the ability to work hand-in-glove with Government is critical to being able to deliver on the issues that really matter for the region.

Without Government support, we would not have been able to generate new jobs, create a better transport network, and build the thousands of new homes needed by our population.

And let’s be frank, one of the most important relationships is that with the Treasury – they, after all, hold the purse strings.

Devolution of power gave the regions the ability to make key decisions locally, but a close relationship with the Treasury is vital to get the funding to enact those plans. A huge part of any Metro Mayor’s job is banging the drum in Whitehall to win that investment.

I have been pleased to previously work with Phillip Hammond and Sajid Javid, both of whom are proven friends of the West Midlands. Since I became Mayor, we have brought in £2.3 billion of new Government money, prising it out of the Treasury. The results of that spending are reflected all around us in the West Midlands, not only in the new infrastructure and transport projects, but in the strong economic growth we have seen.

Now we get to work with the new Chancellor, Rishi Sunak, who was widely tipped as a rising star of Government. On Saturday he demonstrated an early commitment to the West Midlands by coming to the region to meet with me and the business team.

I took from that meeting that he has a clear passion for the Government’s commitment to “levelling up“ the regions and an understanding that it has to be followed up with serious cash. For my part, I was keen to stress that “unleashing our potential” is all about investing in opportunities here, and we will deliver for UK plc.

This budget may also illustrate for the first time that Whitehall is willing to change investment guidelines that have benefited the South East for decades, to the detriment of the rest of the UK. Known as the ‘Green Book’, these Whitehall rules are said to impose a bias on investment towards London, by pumping public cash to areas where productivity and prosperity are already higher.

After years of talk about rebalancing the economy, the time has come for us to rethink these rules. The voters who backed us expect to see the UK economy levelled up. It’s time to put our money where our mouth is.

For the West Midlands, that means a shopping list for the Budget on March 11th that will allow us to build on the successes working with Government has already achieved. First of all, we must continue our mission to create a world-class transport system across the conurbation, to tackle congestion, improve air quality, and attract jobs and businesses.

Work on Metro extensions is already underway in Birmingham and Dudley. We need to step up the pace and secure support for the next phase – through East Birmingham and out to Birmingham airport. By building this tram line, we will be able to create a corridor of prosperity giving people better access to the jobs and opportunities being generated by our growing economy, and attracting investment into communities who have been isolated by a lack of connectivity.

Sticking with transport, we are already leading the way in reversing the Beeching cuts to the nation’s railways. Proposals to re-open stations in South Birmingham and Walsall have already reached the planning permission stage.

Now we need the funding to go full steam ahead to open more new stations and boost public transport in communities that haven’t had a station for over 50 years. This spending would provide tangible evidence of levelling up in action, improving the lives of residents, boosting civic pride, and delivering footfall to high streets.

These old railway lines also need reopening to support our new housing and regeneration sites across Birmingham, Country and the Black Country. Our ‘Brownfield First’ housing policy is delivering thousands of new homes on once derelict sites, while helping to protect the Green Belt. We have a proven ability to deliver much-needed homes quickly, with a surge in house-building of 40% in just two years. Of the 17,000 houses built last year, three quarters were on brownfield sites.

The good news is we still have an abundance of old derelict areas that can be decontaminated ready for new homes – and a pipeline of developers keen to start construction. We want to see the investment released to continue the ground-breaking work of Brownfield First.

Finally, as the West Midlands continues preparations for the Commonwealth Games in 2022, we want to invest in a programme that ensures the event brings new businesses and lasting jobs to the region. The Games offer an incredible opportunity to showcase our region to the world, and we are determined to take full advantage of the international interest they will generate. That work will start this year, at the Dubai World Expo.

Before, during, and after the Games, we have planned trade and investment shows, activities to attract businesses, and promotional activity to extend tourism to the wider Midlands region, but these currently have no funding in the Commonwealth Games budget.

Backing this ambition to creating an economic legacy after the Games would provide a tangible, social example of levelling-up beyond infrastructure investment.

I am looking forward to a budget on March 11th that continues to demonstrate that we have a Government, and a Mayor, determined to work together for our region, as we have done for the last three years.

We have a proven track record of using Government money to deliver jobs, transport, and housing, in innovative ways. We have shown that we have the ideas and the methods to level-up the country. By continuing to back us with real investment, the Government will send a vote of confidence in the power of local decision-making.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

John Redwood: In this post-Brexit budget, Sunak should spend more, cut taxes and raise borrowing

Sir John Redwood is MP for Wokingham, and is a former Secretary of State for Wales. His most recent book is “We Don’t believe you: Why Populists reject the Establishment”.

This budget is more than usually important. It is the first budget for the period after we have left the EU. It is an opportunity to show how we can use the new found freedoms after departure, and spend the additional money we will save by ending our budget contributions to Brussels. It takes place against a gloomy world background, with China’s virus hitting the output and trade of the world’s second largest economy, whilst the EU has slowed almost to a halt with a big decline in manufacturing.

I remember publishing a draft indicative budget for the first year after our exit from the EU for the Vote Leave campaign in 2016. That budget assumed we would end all budget contributions two years after the referendum. It proposed a mixture of spending increases and tax cuts to spend the £10 billion a year (now higher) we would be saving by ending our net contributions. On the tax cutting side I favoured removing VAT from green products, from home heating bills, from carry cots, from child seats, and from female hygiene products. It is important we do use our freedom to remove VAT from items we would not choose to tax, as a visible sign of how leaving the EU can make things better. I also proposed a Council Tax reduction and a Stamp Duty reduction. On the spending side I set out priorities to boost spending on the NHS, social care and transport. It included 10,000 more doctors, 60,000 more nurses, cuts in hospital car parking charges, more for social care and local roads, and extra for disability and cancer treatments. These were presented as an early budget submission to the Government in the event of a Leave vote.

The spending proposals have been subsumed by more generous ones in recent government actions. The budget should confirm the promised substantial increase in spending on the NHS to allow more staff and new treatments, allowing necessary recruitment of additional nurses and doctors to cope with increased demand. It will pay for the increase in per pupil funding at state schools, and the step change in investment in rail and road infrastructure already announced. There are various other good causes that would like additional money. There also needs to be proper scrutiny of current spending. There are old programmes that can be discontinued, and new ways of raising productivity and quality to cut the costs of some existing services. There are activities and assets that can be transferred to the private sector through for example the sale of surplus land from the MOD and Network Rail, and the sale of homes from social provision to tenants who would like to own their own property. The NHS of course will not be privatised.

The big issue in the budget that is yet to be resolved with public decisions is how much tax should the government collect and how should it raise it?  The new Chancellor could have another go at explaining the significance of the Laffer Curve to the Treasury. George Osborne signed the Treasury up to the important notion that if you set a tax rate too high you will collect less revenue. The Treasury then assumed very high rates of tax before the negative Laffer effect hit the revenues collected. In practice, taxes like Capital Gains, Stamp Duty Land Tax and higher rate Income Tax can suffer falling revenues at lower rates.

Capital Gains is only payable if someone sells an asset. Many people do not trade down or up in the property market as they would like to because the Stamp Duties on dearer properties and second properties are now so high, seeing 28 per cent as too much when they need to switch homes subject to tax. Many self-employed people or people working for companies they control do not pay themselves larger salaries if Income Tax is too high, or they choose to work less or to earn more outside the country than in the UK under different legal tax arrangements. Some simply emigrate, taking their investment with them. Every time Conservative governments have cut the top rate of Income Tax, the take has gone up, and better off people have paid a bigger proportion of the total as a result.

We need to raise more money from the better off to pay for our public services. The way to do that is set tax rates that rich people will stay to pay. The top rate of Income Tax was cut from 50 per cent to 45 per cent and raised more money. A further cut to 40 per cent should also raise more. Taking Stamp Duty rates back to somewhere nearer the levels of 2015 before the big increases would probably raise more money from dearer properties as transactions would expand again. Taking CGT down from the current two tier 28/20 per cent structure would probably increase CGT revenue. In each case the Chancellor could say he would adjust the rate up if by any chance there was a shortfall and he had misjudged the right inflection point on the Laffer Curve of where you start to lose revenue from higher rates.

None of these tax cuts cost overall revenue. The budget also needs to give some money back to all taxpayers by reducing bills for everyone in ways that do cost revenue, at least in the short term. The UK is quite highly taxed. It needs to be more worthwhile to work, with less money taken out of pay packets in stoppages. This can be done by cutting National Insurance, as the Government has promised. It could also be augmented by a cut in the standard rate of Income Tax. Any tax cut helps reduce the employment trap created by benefit withdrawal as people find jobs from unemployment. The marginal rate of tax and benefit withdrawal is too high in some cases. The Government should also look again at its IR35 decision which is leading to losses of contracts and of whole businesses amongst some smaller contractors.

We hear the Government is working on the fiscal framework. State debt in the UK, adjusted for all the debt the state has bought in and owes itself, is not too high. Borrowing a bit more today at very low rates of interest to undertake the Prime Minister’s infrastructure revolution is fine. Spending a bit more on crucial public services is desirable and affordable. There are still areas of spending to make more efficient or to discontinue. The Government should aim for a decent sized  fiscal injection given the sharp slowdown in the world economy and the need to promote growth and prosperity at home. The rest of the world is embarked on policies to offset the industrial decline and the Chinese slowdown. We need tax cuts for all. The UK has to show it is open for business and a place where investment is worthwhile and success is rewarded. Above all, to keep the success of job creation advancing it needs to be more worthwhile to work.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Tom McPhail: Successive governments have dodged tough choices on pension tax reform for too long

Tom McPhail is head of policy at Hargreaves Lansdown.

Not for the first time, the prospect of an impending budget has prompted an outbreak of speculation around the possibility of pension tax reform. This is not to say the speculation is unfounded: this is the first time in around 15 years a government has the opportunity and the means to undertake meaningful reform of what has become a bloated and inefficient system, riddled with inconsistencies and inefficiency. The Chancellor should announce in the Budget a consultation to review the options available and then press on with reform as quickly as possible.

Many of the myriad problems with the system are the result of previous governments’ unwillingness to make tough choices. I’ve set out here a brief summary of the reasons why change is needed, why I think now is the moment to do it, and what the options for reform might look like.

The Conservative Party manifesto had already identified two specific problems which need addressing; the Tapered Annual Allowance, which has been landing high-paid workers, including key high-paid public sector employees such as doctors with punitive tax bills; and the net pay tax relief administration system adopted by some employers, which results in lower paid employees missing out altogether on their free government-funded tax relief top up to their pension.

The Pensions Policy Institute estimates that around 64 per cent of pension tax relief is enjoyed by the 17 per cent of the population paying higher or top rate income tax. It is hard to regard this as socially equitable; to give the least support to the most needy individuals and to give the most support to the wealthiest few.

This approach only makes sense when viewed through the logic of deferred taxation, whereby tax relief is granted now to avoiding taxing money paid into a pension until the ultimate withdrawal of that money in retirement, when income tax is then levied on the withdrawals.

When viewed as an incentive to save, though, tax relief clearly makes no sense to most people. Research by the pension scheme B&CE in 2015 showed that of people actually in a pension, 74 per cent either didn’t know how tax relief worked or weren’t even aware it existed. The Government is spending tens of billions of pounds a year (roughly £30 billion to £50 billion, depending on how you want to measure it), on a scheme which is largely unappreciated by the population.

Other problems are mounting up. The Lifetime Allowance, the cap applied to limit the overall amount that can be saved in a pension without extra tax charges kicking in, now acts as a penalty on those who have saved prudently or invested wisely. It cannot be right to penalise savers just because their investments have performed well.

Conversely, on death, pension funds pass on largely tax free, thereby creating a gaping hole through which tax revenues can leak.

Retirement saving among the self-employed is alarmingly low, with just 31 per cent currently actively saving in a pension.

The Money Purchase Annual Allowance cuts the maximum amount you can pay into your pension, from £40,000 a year down to just £4,000, once you choose to draw income from your pension. This would be fine if everyone stopped work in their 60s and stayed retired.

But they don’t; in fact the concept of ‘retirement’ is becoming redundant. Increasing numbers of people pass through a transitional process of tapping into their pension savings in their 50s, whilst managing an ebb and flow transition into retirement and not becoming fully economically inactive until their 70s. Currently this happens largely by choice, increasingly in the future it will be by necessity.

Into this muddled environment has arrived a Conservative government with a very different agenda from the one that reviewed pension taxation in 2015. Then, the review initiated by George Osborne ran aground on the rocks of opposition from the right-wing press and from a pensions industry that couldn’t see beyond its short-term interests.

Now, the world is very different. Auto-enrolment has transformed retirement saving, bringing ten million new savers into the fold and their employers are on the hook to pay for it, whether they want to or not. The 2015 Pension Freedoms which revolutionised the choices available for retirement income withdrawal also now demand people make more decisions. The challenge is no longer about getting people into pensions, it is about persuading them to engage with their savings and to save more.

Meanwhile, we have a Conservative government with a very different focus compared to the past. It recognises the need to address the interests of voters in those ‘Red Wall’ seats in the Midlands and North. Voters who in the main are not higher earners, who aren’t much interested in the principles of deferred taxation but who would know a good deal if it was presented to them. The challenge is to craft a good deal out of the existing system.

Unfortunately, you can’t touch pensions policy without upsetting someone. Any redistribution will mean losers as well as winners. Given the real winners today are the high earners (but not the very high earners, who have largely given up already and left the field), and members of final salary schemes, this is where opposition is likely to come from.

Employers are also likely to find themselves being asked to pay a little more; whilst employer pension contributions are still very generous in pockets of the economy, largely a legacy of the final salary system, for most of the ten million new joiners in the auto-enrolment system, employer contributions are around the statutory minimum of three per cent of pay.

So what changes could we see? To simply scrap higher rate tax relief would be an act of fiscal hooliganism; it would punish the high earners and severely undermine such self-employed retirement saving as does still exist, whilst doing nothing for lower earners. Subtler options include moving away from tax relief altogether, either in favour of a flat rate top up, or a combination of more generous employer contributions, combined with higher Treasury top-ups applied selectively. We think it is possible to create a new system where, in effect, every £1 paid into a pension by an individual would be doubled, either by their employer, or by the government.

Other aspects of the system potentially up for grabs include: imposing Employer’s National Insurance on their contributions, worth over £11 billion a year; introducing a death tax on pension funds; scrapping tax relief on workplace employee pension contributions (after all, why give tax relief if employers are doubling your money anyway?); or reducing the tax free lump sum at retirement, which would seriously undermine confidence in the system for the future.

Given the complexity of the system, the first step should be to open a consultation for review.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

The “Tory press” are keen to show they will provide the real opposition to the Government

Pontius Pilate asked:

“What is truth?” 

There is always plenty of speculation in the media before a cabinet reshuffle and before a Budget. With the reshuffle expected on Friday, and the Budget due to be delivered on March 11th, we are presently overloaded. Sometimes the reports are contradictory and so, by definition, they can not all materialise. Happily for the correspondents whose predictions prove array, such stories are soon forgotten. Once the announcements are made, then the hard news is the focus of attention. Private Eye occasionally provides a disobliging “hack watch” recounting past claims – but everyone else quickly moves on.

However, sometimes, even if an item of speculation does not materialise, it does not mean that it was untrue. It is more complicated than that. Prime Ministers and Chancellors can change their minds. Fleet Street subeditors can make a headline “stronger” than the caveats in the article below it might justify.

The Daily Mail reports this morning:

“Andrea Leadsom is facing the axe in this week’s reshuffle after ‘lecturing’ Boris Johnson on the dangers of a male-dominated Cabinet.

“The Business Secretary, whose position was already under threat, sparked irritation in Downing Street at the weekend by insisting in a newspaper article that gender equality should be ‘the absolute norm’.”

Let us suppose that she is not sacked. Does it mean the story was pure invention? Not necessarily. The “irritation” might well be genuine. The Prime Minister might be “minded” to sack her. But then he might be persuaded at some meeting tomorrow, or Wednesday, that it would be better for her to stay. In other words, the truth can change. What might be true on Monday might no longer be true on Thursday.

I suspect most Conservatives will have been more concerned by the Budget speculation. The Sunday Telegraph yesterday splashed with the headline:

“Tories eye mansion tax and raid on pensions”

Its report said:

“Boris Johnson has been weighing up shock plans to impose a ‘mansion tax’ on owners of expensive homes, in a move which will infuriate the Conservative Party’s grassroots and stun MPs. Severe cuts to pension tax relief enjoyed by millions of voters are also being considered by the Prime Minister and his Chancellor, Sajid Javid, for the Budget next month in an effort to pay for a huge increase in public spending. Two separate sources told The Telegraph that ideas to raise more tax from better-off homeowners had been discussed on separate occasions in the past few weeks at the highest levels of the Treasury and No 10. Some Treasury officials are understood to be keen on introducing what has been described as a “recurring” wealth tax that would primarily affect London and the South East, possibly as a quid pro quo for cutting stamp duty. It is not clear exactly what form the tax would take if it were included in the March 11 Budget, but options range from a levy – first mooted by Ed Miliband, the former Labour leader – to an additional higher band of council tax.”

It added;

“Two separate sources told The Telegraph that ideas to raise more tax from better-off homeowners had been discussed on separate occasions in the past few weeks at the highest levels of the Treasury and No 10.”

The paper followed up today with various people attacking the proposals – one response being that they are “half baked”, another warned against an “act of fiscal hooliganism”.

For many Conservatives, that story will have caused rather more concern than the game of musical chairs around the Cabinet table. As Tony Benn used to remind us:

“It’s not about personalities. It’s about issshues.”

Even if the measures are not introduced it does not mean that the Telegraph story is false. It could be that someone thought it would be a good idea to “float” the idea in the media to test reaction. If so, then the staunchly negative response will have been noted. Expectation management is sometimes regarded as a cunning wheeze. Perhaps by threatening us with really severe tax increases, the notion is that we will all be grateful and relieved if only mild tax rises are imposed.

Officially sourced stories are pretty reliable. “It will be announced later today….” or “The Prime Minister is expected to say to this afternoon in a speech in Bolton…” Those with unofficial sources have a greater risk of unravelling.

So are we merely in a busy season for a most traditional media sport?

Not quite. The tone and substance of the “Tory press” is markedly lacking in deference for the Conservative Government. The initiative by Downing Street to disrupt the established “lobby” arrangements for reporting may have been – as Andrew Gimson wrote last week – handled in a “cack handed” manner. Or it could be an overdue move to open up a smug closed shop and adapt to the age of transparency and social media. It might be both. At any rate, it won’t have helped relations with the press.

There is also a point of pride that newspapers have to assert their independence, most particularly when a Government is strong. We had a big Conservative majority returned in December – since then the polling suggests that Conservative popularity has risen further. We have vacancies for the Labour and Lib Dem leaderships. This is a time when the media’s instinct is that it must “hold the Government to account”. Who else will offer “real opposition”? That instinct is noble. For the Daily Telegraph it is a particular point of honour. That is because its association with the Prime Minister is so well known. He wrote for them for decades. The paper is not shy about it – it features an archive of his work prominently on its website. But nor does it wish to be regarded as his poodle.

That is not to suggest that we should be complacent about threats of tax increases. How can we be, after the last decade? With the economy already groaning under the weight of the burdens imposed by Gordon Brown we have seen Conservative Chancellors in subsequent years piling on yet more damaging tax rises – sometimes proving counter productive in terms of yield.

It is just worth noting that when the Telegraph catches a whiff of such stories, its inclination, at this stage in the political cycle, will be to offer pretty robust coverage.

Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Here’s how to set up a college savings plan for your child

Westlake Legal Group college-savings-plan-feautre-blacksalmon Here’s how to set up a college savings plan for your child Virginia 529 university universities Savings public college private education private college money Family Education College Savings college children Budget
© blacksalmon / stock.adobe.com

There’s no getting around it: College is expensive. 

There’s tuition (in state and out of state), room and board, textbooks, additional fees … you get the point. For some local residents who have children enrolled in private school, paying out of pocket for these costs won’t come as a surprise, but for those helping their soon-to-be adult children make the transition into college life from public school, this could be one of the biggest financial endeavors you face as a family. 

With the start of a new year and (potentially) the need for a new family budget, we spoke with two local financial advisers about everything you need to know in order to start saving for your child’s education—the right way. 

Travis Russell, CFP, is a principal and client adviser from Glassman Wealth Services, and Brett Bernstein is the CEO and co-founder of XML Financial Group. Both have shared their knowledge and experience in the highlights below. 

First things first, what options do readers have in terms of saving for college?

TR: The two most common savings options for children are the college 529 savings plans and the Uniform Transfers to Minor Act (UTMA) accounts.

The Virginia 529 college savings plan is the more popular option, and generally the type of account we recommend individuals use for college savings. While individuals from any state can open a Virginia 529 account, the owner must be a Virginia resident to receive a tax deduction. Individuals can receive a Virginia state tax deduction equal to the lesser of their contribution or $4,000 per account. Individuals over 70 can receive an unlimited state tax deduction based on their contributions, which can be a great savings opportunity for grandparents. Additionally, the growth on the assets within the account is withdrawn tax-free if the assets are used for qualified education expenses.

On the other hand, UTMA accounts are taxable accounts, meaning annual dividends and interest are subject to tax, and the assets within the account must be distributed to the child upon reaching age 21 in most states. Many parents are not comfortable with 21-year-old children having complete control of the money, and we see that as the primary drawback for these types of accounts. The benefit of the UTMA account is additional flexibility to use the money for purposes other than education. 

BB: Another way is prepaid, for example at the University of Maryland, where you pay for the education up front and in advance. But we tend to avoid suggesting those because, long story short, a lot of the prepaid plans don’t have to give you as much money as the plan earns. The nice thing about it is you know your child is going to go to the state school, but that doesn’t mean the investment was worth it in the long run. 

Out of all of the college savings options, which do you find to be the most effective?

TR: The 529 account is likely the best savings option for individuals in Virginia. Virginia 529 options can be opened online or through American Funds with the help of a financial adviser. Both platforms provide extensive investment options, and, if utilizing American Funds, we recommend utilizing the lowest cost share class available. The account can be used to fund all qualified educational expenses for college—both undergraduate and graduate programs. Additionally, 529s can now be used to fund tuition costs for private K through 12th grade educational programs, up to $10,000 per child per year.

BB: The Virginia 529 plan for college and other educational expenses is the best one. 

Other than simply having money set aside for your children to go to college, what are the benefits of saving money for tuition and fees in the future?

TR: The real benefit of saving for your children while they’re young is the potential tax-free growth within a 529 account. As the kids grow older and college grows closer, there is less time for the assets to grow, so it’s important to save early. The compound growth can be significant if saving starts at a young age.

BB: The power of compounding is invaluable. When kids get into the college years, it’s sometimes the biggest expenditure years for parents, especially if you have multiple kids. And with the cost of schools now, you could have a $40,000, $50,000 or even $80,0000 tuition per year. Parents could have to refinance their homes, take out an equity line or put the child into debt. But if you start early and do your planning, you could avoid that. The first question I always ask is, “What’s your goal?” If someone would rather have retirement goals and do what they can afford to do, that’s fine. Or maybe they do what they can do to make sure their child has no debt, that works too.  

What should readers know about setting themselves up to save, even if it’s not thousands of dollars each year?

TR: Like most savings strategies, there is nothing wrong with starting small and gradually increasing the savings amount. Starting with $50 or $100 per month adds up over time. 

BB: Nothing’s too small, the power of compounding is very powerful, and every situation is different. It’s about doing the best that you can for savings. Most people are never going to be able to put away enough to cover it all (tuition, room and board, expenses, etc.). When we do planning, I show parents the numbers. A lot of parents will estimate their child’s college costs and say, “Let’s say $50,000.” In today’s dollars (and with tuition increases in the future), the plan will show you that you would probably need to be saving $1,500 to $2,000 a month. Most people can’t do that, but if you take the approach of doing the best that you can and then supplement (with loans, cash at-hand, etc.) when the time comes, at least you’re not coming in empty-handed. 

Lastly, what is the best way to start talking to your children about the financial responsibility of college?
TR: Whether it’s college savings or finances in general, early conversations about savings, investments, budgeting and more can be extremely impactful as the kids become young adults. Opening up Roth IRA accounts with earnings from high school jobs, using websites like Mint to track spending, teaching kids about philanthropy or even adding them as an authorized credit card user to teach them about credit can be great lessons prior to heading off to college.

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Real Estate, and Personal Injury Lawyers. Contact us at: https://westlakelegal.com 

Here’s how to set up a college savings plan for your child

Westlake Legal Group college-savings-plan-feautre-blacksalmon Here’s how to set up a college savings plan for your child Virginia 529 university universities Savings public college private education private college money Family Education College Savings college children Budget
© blacksalmon / stock.adobe.com

There’s no getting around it: College is expensive. 

There’s tuition (in state and out of state), room and board, textbooks, additional fees … you get the point. For some local residents who have children enrolled in private school, paying out of pocket for these costs won’t come as a surprise, but for those helping their soon-to-be adult children make the transition into college life from public school, this could be one of the biggest financial endeavors you face as a family. 

With the start of a new year and (potentially) the need for a new family budget, we spoke with two local financial advisers about everything you need to know in order to start saving for your child’s education—the right way. 

Travis Russell, CFP, is a principal and client adviser from Glassman Wealth Services, and Brett Bernstein is the CEO and co-founder of XML Financial Group. Both have shared their knowledge and experience in the highlights below. 

First things first, what options do readers have in terms of saving for college?

TR: The two most common savings options for children are the college 529 savings plans and the Uniform Transfers to Minor Act (UTMA) accounts.

The Virginia 529 college savings plan is the more popular option, and generally the type of account we recommend individuals use for college savings. While individuals from any state can open a Virginia 529 account, the owner must be a Virginia resident to receive a tax deduction. Individuals can receive a Virginia state tax deduction equal to the lesser of their contribution or $4,000 per account. Individuals over 70 can receive an unlimited state tax deduction based on their contributions, which can be a great savings opportunity for grandparents. Additionally, the growth on the assets within the account is withdrawn tax-free if the assets are used for qualified education expenses.

On the other hand, UTMA accounts are taxable accounts, meaning annual dividends and interest are subject to tax, and the assets within the account must be distributed to the child upon reaching age 21 in most states. Many parents are not comfortable with 21-year-old children having complete control of the money, and we see that as the primary drawback for these types of accounts. The benefit of the UTMA account is additional flexibility to use the money for purposes other than education. 

BB: Another way is prepaid, for example at the University of Maryland, where you pay for the education up front and in advance. But we tend to avoid suggesting those because, long story short, a lot of the prepaid plans don’t have to give you as much money as the plan earns. The nice thing about it is you know your child is going to go to the state school, but that doesn’t mean the investment was worth it in the long run. 

Out of all of the college savings options, which do you find to be the most effective?

TR: The 529 account is likely the best savings option for individuals in Virginia. Virginia 529 options can be opened online or through American Funds with the help of a financial adviser. Both platforms provide extensive investment options, and, if utilizing American Funds, we recommend utilizing the lowest cost share class available. The account can be used to fund all qualified educational expenses for college—both undergraduate and graduate programs. Additionally, 529s can now be used to fund tuition costs for private K through 12th grade educational programs, up to $10,000 per child per year.

BB: The Virginia 529 plan for college and other educational expenses is the best one. 

Other than simply having money set aside for your children to go to college, what are the benefits of saving money for tuition and fees in the future?

TR: The real benefit of saving for your children while they’re young is the potential tax-free growth within a 529 account. As the kids grow older and college grows closer, there is less time for the assets to grow, so it’s important to save early. The compound growth can be significant if saving starts at a young age.

BB: The power of compounding is invaluable. When kids get into the college years, it’s sometimes the biggest expenditure years for parents, especially if you have multiple kids. And with the cost of schools now, you could have a $40,000, $50,000 or even $80,0000 tuition per year. Parents could have to refinance their homes, take out an equity line or put the child into debt. But if you start early and do your planning, you could avoid that. The first question I always ask is, “What’s your goal?” If someone would rather have retirement goals and do what they can afford to do, that’s fine. Or maybe they do what they can do to make sure their child has no debt, that works too.  

What should readers know about setting themselves up to save, even if it’s not thousands of dollars each year?

TR: Like most savings strategies, there is nothing wrong with starting small and gradually increasing the savings amount. Starting with $50 or $100 per month adds up over time. 

BB: Nothing’s too small, the power of compounding is very powerful, and every situation is different. It’s about doing the best that you can for savings. Most people are never going to be able to put away enough to cover it all (tuition, room and board, expenses, etc.). When we do planning, I show parents the numbers. A lot of parents will estimate their child’s college costs and say, “Let’s say $50,000.” In today’s dollars (and with tuition increases in the future), the plan will show you that you would probably need to be saving $1,500 to $2,000 a month. Most people can’t do that, but if you take the approach of doing the best that you can and then supplement (with loans, cash at-hand, etc.) when the time comes, at least you’re not coming in empty-handed. 

Lastly, what is the best way to start talking to your children about the financial responsibility of college?
TR: Whether it’s college savings or finances in general, early conversations about savings, investments, budgeting and more can be extremely impactful as the kids become young adults. Opening up Roth IRA accounts with earnings from high school jobs, using websites like Mint to track spending, teaching kids about philanthropy or even adding them as an authorized credit card user to teach them about credit can be great lessons prior to heading off to college.

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First city to use tax money to help women get abortions is…

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The answer is Austin, Texas. The first city in the United States to fund ‘logistical services’ for women to get an abortion with tax money is Austin, Texas. The taxpayers’ money will not directly pay for abortions – that would violate state law – so on Tuesday the Austin City Council did a go-around of state law.

The city council voted in favor of an item in the 2020 budget that distributes $150,000 to assist low-income women with logistical services in order to help them get abortions. These services include transportation, daycare, travel, and counseling. Since Texas law doesn’t allow abortion clinics to be funded in the state budget, this is how Austin will go around that obstacle. The Austin councilwoman who sponsored the resolution said restrictions on abortion doesn’t represent Texans’ values. That will be news to many Texas women.

Councilwoman Leslie Pool, who sponsored the resolution, says as Republicans in Texas chip away at abortion rights, it is important to make sure that all women have ‘access to the full range of reproductive health care, including abortion.’

“Here we are at Austin City Hall, a mile away from the state capitol, and yet we couldn’t be farther apart on our values when it comes to expanding access to the full range of reproductive healthcare, including abortion,” Pool said. ” It’s a shame that as the years go by, more restrictive laws go into place, chipping away at Roe v. Wade and women in our community have less access to abortion care. This proposal will make sure that Austinites who need an abortion can access that care.”

The action seems to be in response to Senate Bill 22, a new state law prohibiting local and state government from giving taxpayer dollars to abortion providers and their affiliates. That law went into effect on September 1. Planned Parenthood was given a sweetheart deal on rent for its east Austin clinic by the city. The rent was set at $1 per year. Senate Bill 22 was partially in response to that deal.

This action by the Austin City Council is being called a political stunt by opponents. Donna Campbell, the Texas State Senator who is the primary author of Senate Bill 22, said she will be working with the Texas State Attorney General on this development. Campbell is an emergency room physician.

The pro-abortion crowd denies that the City Council’s vote was about Senate Bill 22. It’s a “creative way” for those seeking abortions to have access, you see. It’s a decision based on what the community “needs”.

Aimee Arrambide, executive director of NARAL Pro-Choice Texas, said the funding isn’t a response to SB 22, rather a creative way for Austin to make sure its community has access to abortion healthcare.

“It’s more a direct response to the combination of abortion bans that have been passed throughout the year and the abortion bans sweeping the country rather than being a direct result of SB 22,” Arrambide said.

The City Council worked with Arrambide and other leaders of abortion-rights organizations following abortion bans in states including Georgia and Alabama. The coalition suggested funding incidental costs through organizations who help women gain access to the procedure since it doesn’t interfere with state laws.

“I don’t make decisions based on what the Legislature wants, I make decisions based on what our community needs,” said Mayor Pro Tem Delia Garza, who led the amendment along with Council Member Gregorio Casar.

This is the trend. Pro-abortion advocates are looking for ways to undo legislative actions in individual states, usually red states. I have written about this twice over the course of last summer. In June, I wrote about a Michigan hotel that offered free lodging to women traveling from out of state for an abortion. In August it was pre-paid gas cards issued by an abortion group to women so they could drive to an abortion provider. The Austin City Council upped the game and successfully voted to spend tax money to help women obtain abortions. Look for other liberal cities to follow.

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Romney: I’m voting against this garbage budget deal

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He *did* once say that he was “severely conservative,” remember. Who could have guessed at the time that he was telling the truth?

“Utah balances its budget every year, and while it may not be in fashion in Washington, we still care deeply about fiscal responsibility. The federal government, however, has followed a very different course, and our national debt now totals over $22 trillion,” Romney said in a statement to The Hill.

“This deal unfortunately perpetuates fiscal recklessness by adding another $2 trillion to the debt, and I cannot support it. We must repair our fiscal foundation and set a course to a balanced budget now so that we avoid a future debt crisis that would pose grave hardships for our children and grandchildren.”

Romney joins Sens. Ron Johnson (R-Wis.), Mike Braun (R-Ind.), James Lankford (R-Okla.), Mike Lee (R-Utah) and Rand Paul (R-Ky.) in opposing the deal. Other Republicans, including Sens. Josh Hawley (Mo.), Marco Rubio (Fla.) and John Kennedy (La.), are still undecided.

This is a rare instance in which it’s low-risk for a Republican in Congress to be on the wrong side of an issue from Trump:

It’s always low-risk for Romney to be on the wrong side of Trump because, unlike most senators, he’s more popular in his red home state than Trump is. POTUS couldn’t give him the Jeff Flake treatment even if he wanted to. And since Romney got elected to a six-year term just last year, the soonest he’d need to worry about Trump backing a primary challenger to him is 2024, when Trump will be in the final year of his presidency (assuming he wins next fall, of course) and his influence over the party will be waning. This was, then, a safe vote for Mitt. But it’s also relatively safe for Johnson, Braun, Lankford, and Paul simply because the deal is all but guaranteed to pass both chambers of Congress with Democratic support. It’s an unusual case of Trump not needing (many) votes from his own party to get something done, in which case the logical thing for congressional Republicans to do is maintain the pretense that they’re interested in shrinking government and vote no. That’ll keep fiscal conservatives back home happy. And Trumpers who might otherwise be unhappy at their defiance of King Donald won’t care since the bill will pass anyway.

No wonder, then, that the Trump cheering squad known as the Freedom Caucus decided to go their own way on this vote. In fact, a majority of House Republicans voted no today as the bill passed the lower chamber, 284-149. Pelosi had the votes she needed from her own party so Kevin McCarthy’s crew was free to engage in a bit of harmless tea-party nostalgia.

As for Trump’s own spending priorities, a former senior administration official (Bannon? Scaramucci? Kelly?) told Politico that “He doesn’t care about the cost. Wall Street is happy. The defense folks are happy. That’s good enough.” Trump allegedly told Senate Republicans in a meeting a few days ago how pleased he was at the complacency from Fox News and the rest of conservative media about the deal. Part of that complacency is due to the reality of the new Congress: Pelosi gets a say here, and as she proved with the standoff over funding for the wall this past winter, she’s not prone to blink in a staredown. Why force another standoff that’s destined to end in compromise, if not capitulation? But partly too it’s a matter of recognizing that the central fraud of the tea-party era, the idea that rank-and-file Republicans care meaningfully about limiting government, is now so transparent that it would be pathetic to have another big fight about it, particularly with the debt ceiling in the middle. Let’s just acknowledge reality. Trump has drained the swamp, says Philip Klein — of the tea party:

There are many ways in which the Trump presidency has been disruptive to the status quo. But when it comes to spending and deficits, he has restored Washington to a much more conventional place in which both parties agree to ignore warnings of fiscal disaster, and resolve their differences by simply agreeing to spend more money…

Should investors eventually demand higher interest rates [as a condition of purchasing U.S. treasuries], or should the economy falter — making Americans more dependent on public assistance, leading to federal stimulus, and reducing revenues — deficits will only get much deeper. This is especially true given the tacit agreement of both parties to do nothing to address the crisis facing Medicare and Social Security…

The Freedom Caucus, founded to supposedly represent the Tea Party values of limited government in Congress, has devolved into a PR shop for Trump. Mick Mulvaney, one of the founders of the group, has discounted the importance of deficits as the president’s budget man and chief of staff. And even Rush Limbaugh recently declared that, “Nobody is a fiscal conservative anymore. All this talk about concern for the deficit and the budget has been bogus for as long as it’s been around.”

One of the few lasting spending successes of the tea-party era, notes Klein, was the Budget Control Act passed in 2011, which placed caps on discretionary spending. The new Trump-backed budget deal repeals the final two years of that statute. “There’s stories being written that this is the final nail in the coffin of what used to be the tea party movement. That’s sad. But maybe true,” said Rand Paul. But don’t worry. He’ll be cheerleading again for Trump tomorrow.

Exit quotation from Patterico, attempting to answer the question “What is the point of the Republican Party?”: “This party stands for owning the libs and for nothing else.” Indeed.

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Let’s talk about that almost certainly fake but possibly real “millennial couple can’t make ends meet” budget that’s going around

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To cleanse the palate, this started at reddit, migrated over to MarketWatch, and ended up fluttering around on Twitter today, where it distracted me more than once with its inanity.

It can’t be real.

I mean, this description certainly isn’t real: “My wife and I are in our early thirties. We live in Kansas. I’m a CTO of well known startup, and she’s a model. As you can see, each year we have a large deficit. Currently, we add that to our mortgage each year. We’ve been doing this for 2 years. I’d appreciate any advice on how to reign [sic] our situation in.”

A CTO of a well-known start-up who lives in … Kansas? Please.

There are no computers in Kansas.

But assuming for the sake of argument that there are, no one would have a personal household budget like this:

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There may be computers in Kansas but there are surely no homes that require a $10,000 monthly mortgage payment.

Unless this guy and his wife are morbidly obese and/or dining out for every meal, they’re not spending $3,000 a month on food. I think I could feed, like, eight people reasonably well on three large.

Even married to a model, he’s not spending $2,000 on clothes. And he certainly isn’t spending $3,000 on flights — per month — unless this guy’s start-up is in San Francisco and he’s commuting from Kansas.

And … what the hell is “Vanguard contribution” doing there as an expense? Finance is complicated, I know, but let me try to explain: When you park money in investments, you’re not really spending that money. Assuming you can cash out at any time, which is par for the course at Vanguard, you’re saving money by making that contribution rather than consuming it. If you subtract the Vanguard contribution and the $1,000 monthly contribution to his unborn child’s college fund (which feels kind of spare for someone earning $500,000), this person’s actually coming out ahead each month. He can simply scale back the monthly Vanguard buy and all bills are covered.

I think the smoking gun that this is a goof is “party supplies.” The Bitcoin line is silly. The $40 monthly phone bill is very silly. (Two people, one of them a techie by trade, and neither one has a mobile bill?) But $400 a month for “party supplies” that could be going to savings or to junior’s college fund instead?

I mean, the “party supplies” are obviously cocaine, right?

That’s the joke here — I think. The “party supplies” line is supposed to make you stop, laugh, and go, “Oh, I get it. They’re cokeheads!” But I don’t know. It’s subtle. And plenty of redditors seem to have taken this at face value, as the comments suggest. Also, if it’s all a set-up for a laugh about cocaine, why even use a euphemism? Why not just have a “cocaine” line in the budget?

Or is the joke here that there are so many obvious places for this guy to tighten his belt that no sane person would seek advice for it? All he’d have to do is downsize from a 10-bedroom mansion or whatever the hell he’s supposedly living in to a five-bedroom and he’d be golden. Then he and his wife could stop being so stingy on their food spending and really splurge. Caviar at every meal, baby.

Exit question: Totally fake, right?

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