American Credit Scores Hit Top Of Range

Between now and 2020, you will likely encounter statistics and headlines pointing out that the top range of the average American credit score has recently risen. There is a reason for this. It is because the poor credit events of the Great Depression are starting to roll off the credit reports of American consumers.

For the first time since 2005, the average credit score of an individual in the United States has hit the 700 mark. As a general FICO reference point, credit scores are viewed as follows: 580 or below and you’re considered high risk, 580-670 and you’re in that range where you’ll get a mix of approvals and rejections and likely carry a moderately higher than average interest rate, 670-740 and you have good credit such that you’ll only get rejected if you attempt to borrow a very high number relative to your income, 740-800 and you’re going to get a significant amount of unsolicited bids asking you to borrow money and you will be able to borrow on great terms, and anything above 800 is a best-in-class borrower.

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Illinois Launches 20% Privilege Tax at Financial Professionals

Perhaps a little more often lately, you come across pending legislation in which you can actually feel a politician stick his hand into your pocket and help himself to your wallet. Such a reaction is understandable after you read Illinois House Bill 3393, popularly called the “Illinois Privilege Tax” because it plans to charge investment professionals an extra 20% on their services rendered.

The specifics of the Illinois privilege tax contain the following provisions:

  • Partnerships and s-corporations that provide investment services would be subject to the tax.
  • The original bill stated that the privilege tax would be subject to repeal once the United States federal government removed the lower tax rate on carried interest, though the amended version contains no such expiration.
  • The test for whether a partnership or s-corporation is subject to the tax is whether it derives more than 40% of its income from “advising as to assets”, “managing or disposing of client assets”, “arranging financing or planning over public securities”, or “any any activity that supports the service of asset management.”
  • “Assets” are defined to mean real estate rental or ownership, publicly traded stocks, bonds issued from governments or any business, commodities, options, derivatives, or “any other financing that shares these characteristics.”
  • Partnerships and s-corporations are excluded from this bill if at least 80% of their income comes from the management of real estate.
  • This tax is in addition to all taxes that partnerships and s-corporations are already obligated to pay.
  • The original version stated that the law would not take effect until New York, New Jersey, and Connecticut all passed “substantially similar” legislation on financial professionals, but the amended version merely states that it will take effect on July 1, 2017 and there is no clause limiting when it takes effect or sets it for expiration.

The Illinois Privilege Tax aims to tax financial professionals at a rate of 20%. The definitions of the target audience is too overbroad and the tax hike is so extreme that it will need to a substantial counter-response from the business community if this legislation is enacted.

My takeaways:

#1. Specially targeted taxation generates a special kind of resentment. There is a reason why, when you visit a restaurant, the costs of your cheeseburger are not itemized. You don’t get charged $0.25 for ketchup, $.50 for a pickle, $0.25 for lettuce, $0.25 for tomato, and so on. That is the same reason why it is rare to see restaurants that charge $0.50 for a refill. Such targeting and nickeling and diming feels like extortion, even if the cumulative cost for the burger is the same as a place that just charges $10 regardless of your toppings.

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