It’s Not Too Late to Save on 2023 Taxes
Got some profits you’d like to protect? Gene Marks has some suggestions.
Good Morning!
Here are today’s highlights:
Even as cost pressures ease, big retailers continue to experiment with aggressive pricing.
The EEOC says that a moving company that touts its strong, young employees is discriminating against older employees.
It’s likely to get even harder for small manufacturers to hire and retain workers.
The economy is actually outperforming projections from before the pandemic.
THE 21 HATS PODCAST: DASHBOARD
Your Last-Minute, Year-End Tax Strategies: This week, Gene Marks shares his suggestions for anyone looking for last-minute ways to save on taxes. Start with your retirement account. Better yet, start planning ahead for next year. Plus: What’s the best CRM for solopreneurs and microbusinesses? What artificial intelligence apps for business are worth trying right now? And what does Philly native Gene make of the $140 Philly cheesesteak?
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
PRICING
The big boys are experimenting with more aggressive pricing: “Big companies that had previously pushed through one standard price increase per year are now raising prices more frequently. Retailers increasingly use digital price displays, which they can change with the touch of a button. Across the economy, executives trying to maximize profits are effectively running tests to see what prices consumers will bear before they stop buying. Huge disruptions to supply chains pushed up corporate costs during the pandemic and forced many companies to think more creatively about their pricing strategies, Mr. MacKay said. That supercharged a trend toward more rigorous pricing, and showed many companies that they could more boldly play with prices without chasing shoppers away. The experimentation continues even as costs ease.”
“For big companies in the S&P 500 index, the average profit margin — the percentage of profit relative to revenue — soared in late 2020 and into 2021, as government stimulus and the Federal Reserve’s emergency interventions stoked consumer demand. At the same time, companies raised their prices so much that they more than covered higher costs for energy, transportation, labor, and other inputs, which have recently started to come down.”
“Margins eased somewhat last year, but have recently recovered to levels that would have set records before the pandemic. Average margins in nearly every sector in the S&P 500 are running near or above 10-year highs, according to Goldman Sachs.”
“Retailers, which have been caught out by shifting consumer tastes in recent years, are talking more lately about ‘inventory discipline,’ or keeping less product in stock, so that they can avoid selling things at clearance prices. The logic is that it’s better to sacrifice a few sales by running out of products than being forced to slash prices in a way that hits the bottom line.” READ MORE
HUMAN RESOURCES
Can a moving company tout its strong, young workforce? Not according to the EEOC: “The Equal Employment Opportunity Commission sued Fresno, Calif.-based Meathead Movers this year for violating age-discrimination law by not hiring enough older workers. Employment attorneys and trade groups say the case will offer clues as to how the agency will approach anti-discrimination laws now that President Biden’s picks are installed. Commissioners voted seven times on age-discrimination matters since Democrats gained control in August, compared with three age-related matters earlier in the year. EEOC Chair Charlotte Burrows, whom Biden elevated, has said she would vigorously enforce age-discrimination laws as older workers regularly face age bias, stereotypes, and discrimination.”
“Youthful-looking employees pump iron before grabbing furniture, according to a recent social-media advertisement. Employees compete in the Meathead Olympics in which they compete to assemble and leap over boxes. Numerous corporate Facebook posts show workers flexing with biceps bulging. Employees, dubbed ‘Meatheads,’ must jog from truck to house when not carrying furniture.”
“Many of the EEOC’s allegations against Meathead focus on marketing and hiring practices that could discourage older workers from applying. Current employees are asked to scour local gyms, colleges and places where they would hang out normally for new hires, according to the EEOC.”
“The agency and the company tried to negotiate a settlement. The agency initially wanted around $15 million and then lowered that to around $5 million, according to an email from a Meathead representative to commissioners that was reviewed by The Wall Street Journal. Meathead offered $750,000 to settle.”
“‘We are 100 percent open to hiring anyone at any age if they can do the job,’ said company owner Aaron Steed. ‘People love working at Meathead, or they are turned off by how hard it is. You have to move furniture and run to get more.” READ MORE
The megafactory building boom is going to make hiring even harder for small manufacturers: “U.S. manufacturers have long struggled to find all the employees they need. The coming wave of megafactories, aided by billions of dollars in public incentives, could push the shortage into a crisis, executives and industry officials say. The anxiety is particularly acute in Central Ohio, where Intel is building two semiconductor plants at a combined cost of more than $20 billion, and Honda and LG Energy Solution are constructing a $3.5 billion electric-vehicle battery plant. The companies aim to hire more than 5,000 workers between them, and local suppliers that will serve the factories likely will need thousands more. That leaves smaller manufacturers bracing for an intensifying labor battle.”
“The value of new manufacturing construction projects hit a record $102 billion last year, three times higher than 2019’s total, according to Richard Branch, chief economist of the Dodge Construction Network. Since 2021, 33 manufacturing projects, most of them related to semiconductors or electric vehicles, have cost $1 billion or more.”
“Dana Peters, who co-owns firearms parts and accessories maker Milspin, said skilled workers are so hard to find around Columbus that he no longer seeks them, preferring to train inexperienced people and invest in automation. He hopes his small company’s unique, veteran-focused culture will keep his workforce together, but expects hiring new employees to become even more difficult when the megafactories open. ‘They’re going to take everybody from everybody, I imagine,’ he said.”
“Money could be a deciding issue. The average manufacturing wage in Ohio is about $25 an hour, according to the Bureau of Labor Statistics, and some job postings in the Columbus area are for less than $20 an hour. Representatives for Intel and the Honda/LG joint venture declined to detail their planned wage rates, though Intel said its manufacturing technicians elsewhere in the country can earn $50,000 to $90,000 a year, including incentives.” READ MORE
While some states spurn migrants, the Rust Belt wants them: “[Pittsburgh] jumped into action multiple times recently amid rumors that buses of migrants would be arriving here from the U.S.-Mexico border. The emergency operations center and Red Cross were activated, temporary camps for men and women and children were identified, and interpreters from throughout Southwestern Pennsylvania were put on standby. The buses never arrived, a setback for Pittsburgh-area leaders who are out to prove that just about anyone is welcome in their neighborhoods.”
“‘We are not here to reject any immigration. As a matter of fact, we want to make this the most safe, welcoming, thriving place in America, and you can’t do that without immigration,’ Pittsburgh Mayor Ed Gainey said in an interview, adding that he does not make distinctions on the basis of someone’s immigration status or how the person entered the country. ‘Why wouldn’t we want them?’”
“The reaction of Gainey, and of many other residents in these hilly, ethnically distinct neighborhoods built by the nation’s initial waves of immigrants, contrasts sharply with the stance being taken by leaders in New York and other East Coast cities as the rift over where, how quickly and at whose cost tens of thousands of migrants should resettle in the United States.”
“In cities throughout the Rust Belt and Midwest in particular, many local leaders still view foreign-born residents as lifelines for rejuvenating the population, enhancing the workforce, and transforming local cultures that have yet to catch up to the breadth of the nation’s diversity.” READ MORE
REGULATION
A bipartisan, anti-money-laundering law has suddenly attracted small business opposition: “Three years ago, when Congress passed an anti-corruption law intended to help combat money laundering through shell companies, it drew bipartisan support. Senator Sherrod Brown, Democrat of Ohio, called it ‘long overdue.’ Senator Marco Rubio, Republican of Florida, called it an ‘important provision’ that would help law enforcement agencies crack down on human trafficking and terrorist financing. Now, just weeks before a central aspect of the Corporate Transparency Act is to take effect, it is under assault by interest groups and ideological foes who say it will not work as intended and will put too great a burden on tens of millions of small businesses.”
“The law’s intention is to deter money laundering or the channeling of money to terrorist groups by exposing who is behind firms set up for or being used for those purposes. It exempts most big businesses, where ownership is already reasonably well documented, but places a number of new reporting requirements on many small and newly formed firms.”
“At issue is the law’s definition of a reporting requirement known as ‘beneficial ownership’ — or who actually owns or controls companies. Under the Corporate Transparency Act, beneficial owners are defined as shareholders who own 25 percent or more of a reporting company. But they are also defined as individuals with ‘substantial control,’ such as decision-making power, over a business. Beneficial owners must submit their names, addresses, birth dates, and up-to-date identification records — like a passport or a driver’s license — as part of their filing.”
“‘There’s been a lot of scaremongering,’ said Erica Hanichak, government affairs director at the Financial Accountability and Corporate Transparency, or FACT, Coalition, a nonpartisan anti-corruption organization in Washington. ‘These are really simple pieces of information for most small businesses to track down and find.’” READ MORE
THE ECONOMY
Not convinced about the economy? It’s actually beating pre-pandemic projections: “The nation’s employers added another 199,000 jobs in November, the U.S. Bureau of Labor Statistics reported on Friday. This is slightly better than Wall Street expectations. More significantly, it means that overall employment is now 2 million jobs higher than was expected by now in forecasts made way back in January 2020 by the nonpartisan Congressional Budget Office.”
“This is pretty astounding. When the pandemic hit, many economists feared it would leave lasting scars. After the 2007-2009 Great Recession, after all, it took a long time for the job market to heal and for displaced workers to regain their footing.”
“Yet, somehow, following a once-in-a-century public health crisis that led to record-breaking job losses, American workers didn’t just recover all the ground they’d lost. They’re doing better than ever, better than had been imagined even before this traumatic global shock.”
“The International Monetary Fund says that U.S. gross domestic product is higher today, in inflation-adjusted terms, than it had expected at the beginning of 2020. The IMF ran these calculations for countries around the world, and found the United States was an outlier in beating the organization’s pre-covid forecasts.” READ MORE
And yet, it’s getting very hard to buy a home: “Homeownership has become a pipe dream for more Americans, even those who could afford to buy just a few years ago. Many would-be buyers were already feeling stretched thin by home prices that shot quickly higher in the pandemic, but at least mortgage rates were low. Now that they are high, many people are just giving up. It is now less affordable than any time in recent history to buy a home, and the math isn’t changing any time soon. Home prices aren’t expected to go back to pre-pandemic levels. The Federal Reserve, which started raising rates aggressively early last year to curb inflation, hasn’t shown much interest in cutting them. Mortgage rates slipped to about 7 percent last week, the lowest in several months, but they are still more than double what they were two years ago.” READ MORE
STARTUPS
Roam has a plan to share 3-percent mortgage rates and make housing affordable: “Roam CEO Raunaq Singh has a bold plan to unlock housing affordability: Connect homebuyers with home sellers who have mortgages eligible to be ‘assumable,’ enabling buyers to take over the existing mortgage, including its presumably much lower mortgage rate. Back in September, Singh launched Roam, a real estate portal that resembles Zillow.com or Realtor.com. However, Roam exclusively showcases homes currently for sale with loans eligible to be assumable.”
“If specific requirements are met, most loans insured by the Federal Housing Administration and loans backed by the Department of Veterans Affairs or the United States Department of Agriculture are eligible. The cost savings from getting an assumable mortgage can be huge.”
“Across the United States, the net effective mortgage rate among all mortgage holders is just 3.60 percent, a remarkable contrast to the current average 30-year fixed mortgage rate of 7.32 percent. For perspective, the monthly principal and interest payment on a $400,000 mortgage at a 7.32 percent 30-year fixed rate is $2,748. At a 3.60 percent rate, the same principal and interest payment would be just $1,819.”
“How does Roam make money? Singh tells ResiClub that Roam is free for sellers, and instead, they collect a fee of 1 percent of the purchase price from the buyer through closing costs.” READ MORE
THE 21 HATS PODCAST
We Need to Go Back to Marketing for Humans: This week, Paul Downs tells Jay Goltz and Jaci Russo about the latest developments in his year-long campaign to stop relying so heavily on Google AdWords. At a specially arranged, two-day marketing event, Paul got to sit down with a series of architects and designers who had already been vetted and who he hopes will become repeat customers. So far, Paul says, the results look promising.
“Plus: Do you write your website copy to please Google or to please people? Is there any way around skyrocketing property insurance rates? Why has Jay decided he no longer needs a chief financial officer? How big a disadvantage to owners are the new laws forbidding employers from asking job candidates about their salary histories? And would you reject a candidate simply for trying to negotiate a starting salary? I know someone who would.
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren