Date: May 20, 2016

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Kiss of Death Locations – Podcast



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Podcast Transcript


Hello.  This is Scott McDonald and welcome to the Perfect Place to Put a Practice Podcast. 

 

Just as with my annual Best Place to Put a Practice list, I also provide the “Kiss of Death” list.  These are locations that you should probably avoid considering as a place to put a practice, particularly a start-up.  It started as a joke back in the early 90s.  My staff and I were playing around with the idea that there are some locations that are so bad, we felt a proactive warning sign should be posted.  It would be something like a rip-tide or shark warning.  It is remarkable how popular this little feature has become.

 

Now, before I get into this, there are some obvious cautions that I have to put at the start.  First of all, if you are already practicing in one of these areas, good for you.  Don’t worry, it does not mean that imminent disaster is approaching.  If you have a practice for sale in these parts, just continue onward.  If your production and collections are doing well, terrific.  I will say, however, that these locations will tend to be challenging relative to other locations in the U.S.

 

Second, I base these warnings of sites based upon specific criteria I consider to be important.  There are other folks out there who may have different criteria and, therefore, will have different results.  I am judging locations based upon the following:

 

  1. Lack of growth or actual shrinking of the population
  2. Very poor business environment including excessive taxes, regulations, or cost of doing business.
  3. Declining overall economic development.
  4. Bad demographic character of the population. This does not just mean that they cannot pay their bills no does it mean that they are bad people.  It is that they won’t pay their bills based upon their attitude toward practices.  It is more than just a measure of poverty.  It is a characteristic that indicates a tendency toward dishonestly.  Yeah, that CAN be tracked.
  5. Experiences in the area that may give insight into a declining market.

 

We will start with the state level then drill down into smaller geographic units if possible.

 

Illinois

A growing number of people are choosing to leave the Land of Lincoln. Illinois lost an estimated 22,194 residents in 2015, by far the largest decline of any state. Now, keep in mind that when you are talking about 22,000 people, that is the size of a mid-sized city.  But it is not the rich nor the poor who are leaving.  They are most often small business owners.  They are the middle class.  And once they move, they don’t come back quickly.

The losses, which accelerated from 2014, are partly driven by the state’s economy and a labor market that’s weaker than most other states. Economists suspect some job seekers are opting to retire early and move to warmer climates. Much of the state’s economy, outside of the Chicago metro area, is tied to either manufacturing or agriculture — two sectors that aren’t generating many jobs.

State income tax: 3.8% 

State sales tax: 6.3% 

Gas taxes and fees: 36 cents per gallon

The Prairie State’s income tax dropped to a flat rate of 3.8% from 5% on Jan. 1. The bad news is that taxes on just about everything else in Illinois are high and could go higher as lawmakers grapple with the largest state budget deficit in the U.S. Illinois has the country’s worst-funded state pension program, with a $100 billion shortfall. (Heck, lottery winners of more than $25,000 in the state must accept IOUs for their prizes these days.)

Property taxes here are the second-highest in the U.S. The median property tax on the state’s median home value of $169,600 is $3,939.

The combined average state and local sales tax is 8.2%, the 10th-highest rate in the U.S. In some municipalities, combined state and local sales taxes are as high as 10%. Qualifying food and prescription and nonprescription drugs are taxed at 1%.

Macon County (decline of 2.1%) and Median Household Income of $54,607.  Beware of Decatur!

 Winnebago County (decline of 2.78%) with Median Household Income of $57,064 (Beware of Rockford)

Lee County (decline of 3.4%) with Median Household Income $60,421. Beware of Dixon.

 

West Virginia

West Virginia’s population has remained relatively flat for decades, and that isn’t likely to change anytime soon.

The state fared better economically than most of the country during the Great Recession, enjoying small population gains as a result. More recently, though, the state has recorded slight declines in each of the past three years. Last year, West Virginia suffered the largest year-over-year percentage loss (-0.25 percent) of any state.

One major driver of that decline has been the state’s hard-hit coal mining industry. An expanding natural gas sector has helped, but job creation hasn’t met expectations or offset coal mining losses, said Christiadi, a West Virginia University demographer and economist who goes by one name.

Economic opportunities and wages are frequently more attractive elsewhere, prompting workers to leave, said Christiadi. A net total of more than 27,000 people (up from 17,000 in 2013) migrated out-of-state each of the past two years.

Compounding matters is the fact that the state’s population is one of the nation’s oldest. West Virginia and Maine were the only two states where deaths exceeded births last year, according to Census estimates.

“Hoping to get more jobs from the mining and natural gas industry is just not that reliable,” said Christiadi. “Unless the economy picks up the pace, I expect to see gradual population losses continue.”

Connecticut

A sluggish economy has played a large role in holding back Connecticut, which experienced slight population losses each of the past two years.

Domestic migration losses have accelerated, with the state losing a net total of about 27,000 residents each of the past two years — up from 17,000 in 2013 and 19,000 in 2012.

Economists attributed the uptick to a lag effect from mostly long-term unemployed workers choosing to leave the state for job opportunities. “It took people a while to get their arms around the reality that things were not going back for them,” he said.

Many relocated workers are likely young professionals who either can’t land their first jobs in Connecticut or leave the state for promotions.

State income tax: 3% (on income up to $10,000/individual, $20,000/joint) – 7.0% (on income above $500,000/individual, $1,000,000/joint) 

State sales tax: 6.4% for most items; 7.8% for certain luxury items. 

Gas taxes and fees: 41 cents per gallon

The Constitution State ranks so high because of its one-two punch of property taxes (fourth-highest in the nation) and gas taxes (fifth-highest).

The sales tax on vehicles valued at $50,000 or less is 6.4%; those over that amount are taxed at the 7.8% luxury rate. In addition, vehicles are subject to an annual levy set by individual municipalities. In Hartford, for example, the annual property levy for a vehicle valued at $20,000 is almost $1,500. However, legislation that will take effect next year will cap the rate municipalities can charge. In Hartford, the cap will lower motor vehicle taxes by more than 56%.

The median property tax on the state’s median home value of $267,000 is $5,280.

There are no local sales taxes in Connecticut, so you’ll pay only the statewide rate of 6.4% on your purchases. As of July 1, clothing and shoes under $50 are no longer exempt from the state sales tax. Luxury items, such as jewelry worth more than $5,000, are taxed at 7.8%, which means a $6,000 engagement ring would cost you $6,465. And if those baubles are a gift, keep in mind that Connecticut is also one of only two states with a gift tax (the other is Minnesota), which applies to real and tangible personal property in Connecticut and intangible personal property anywhere for permanent residents.

Minimum Wage: Minimum wage: $9.60

The lowest-paid workers in Connecticut got about a 5% raise to $9.60 at the start of the new year, under a law that’s gradually raising Connecticut’s minimum wage to $10.10 an hour by January 2017. “Increasing the minimum wage is not just good for workers, it’s also good for business,” Democratic Gov. Dannel Malloy said in a statement.

 

Mississippi 

Mississippi’s population totals also appear to be trending in the wrong direction. The size of the state’s gains had been shrinking each of the past few years, before registering a slight drop in 2015.

The primary cause of the state’s stagnant population is the growing number of residents who are moving elsewhere. Mississippi suffered the fourth steepest loss in terms of total net migration (-3.2 persons per 1,000 residents) of any state between 2014 and 2015. Natural change from childbirths offset most of the losses.

By comparison, neighboring Alabama (+12,568), Arkansas (+11,369) and Louisiana (+21,734) registered annual population increases more in line with the rest of the country.

Maine and Vermont

Maine and Vermont face similar demographic challenges. The two northeastern states have the nation’s two oldest populations in terms of median age, so they’re not seeing many births. At the same time, their residents are moving to other states as well.

Vermont recorded a year-over-year net loss of 2,223; Maine lost an estimated 1,718 residents to other states. And while other states offset domestic population losses with increases in international migration, Maine and Vermont haven’t seen the same influx of the foreign born.

After growing over several decades, both states are now experiencing only slight fluctuations, with population changes of generally fewer than 1,000 residents each year. In the coming years, their population growth will likely remain stagnant.

Vermont: State income tax: 3.55% (on income up to $37,450/individual, $62,600/joint) – 8.95% (income more than $411,500) 

State sales tax: 6% 

Gas taxes and fees: 31 cents per gallon

The Green Mountain State vaults from ninth to seventh place in our annual ranking, based on updated property tax numbers and a a new measure that raises taxes on the state’s wealthiest residents.

In an effort to close the state’s $100 million budget gap, Vermont now limits deductions to $15,000 for single residents and $31,500 for married couples. If your income is $1 million, that would cost you about $5,000 in additional state taxes.

The average state and local combined sales tax rate is 6.1%. Food, clothing, and prescription and nonprescription drugs are exempt from sales tax. Starting July 1, though, soft drinks will not be exempt from sales tax. Restaurant meals are taxed at 9%; the tax on alcoholic beverages served in restaurants is 10%.

The median property tax on the state’s median home value of $218,300 is $3,727, the ninth-highest in the U.S.

No. 5: Vermont (tie)

Minimum wage: $9.60

2016 was ushered in with the 2nd of 4 annual increases in the Green Mountain State that will elevate its minimum wage to $10.50 an hour by 2018. “Raising Vermont’s minimum wage will give a boost to many hard-working Vermonters and will help drive increased economic activity and security that will benefit the economy as a whole,” says Democratic Gov. Peter Shumlin, in a news release.


Maine: tate income tax: 6.5% (on income up to $5,200/individual, $10,450/joint) – 7.95% (income more than $20,900/individual, $41,850/joint) 

State sales tax: 5.5% 

Gas taxes and fees: 30 cents per gallon

The Pine Tree State dropped its top state income tax rate from 8.5% to 8.0% in 2013, but that’s still steep compared with other states.

Maine is one of only a few states that prohibit local jurisdictions from imposing their own sales tax, so you won’t pay more than 5.5%, no matter where you live or shop. Food for home consumption and prescription drugs are exempt from sales taxes, but prepared foods in restaurants are taxed at 8%.

Maine imposes an annual excise tax on vehicles that’s based on the car’s age and value. The owner of a three-year-old car with a manufacturer’s suggested retail price of $19,500 would pay $263.25.

The median property tax on Maine’s median home value of $172,800 is $2,206, the 17th-highest in the U.S., according to the Tax Foundation.

CONCLUSION: Thanks for listening to this Podcast.  I’m Scott McDonald of Doctor Demographics.com.  You can listen to our Podcasts on I-tunes or on our web site.  Need help knowing where to put a practice?  Contact us @ (800) 424-6222.

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