Markus Andrews

The Supreme Court will soon hear a case that could have sweeping effects on the U.S. tax code, including corporate revenue and future wealth tax proposals.
Depending on the scope of the rule, it could affect the future taxation of so-called pass-through entities, such as partnerships, limited liability corporations and S-corporations.
“You’ve got to pay attention to the way the rules are going to impact your business, especially if you’re doing things in a cross-border context,” said Daniel Bunn, president and CEO of the Tax Foundation.

The Supreme Court in Washington, D.C.
Celal Gunes | Anadolu Agency | Getty Images

As the Supreme Court starts a new term, experts are closely watching a case that could have sweeping effects on the U.S. tax code, including corporate revenue and future wealth tax proposals.
This summer, the high court agreed to hear Moore v. United States, a case involving a Washington couple with a controlling interest — more than 10% investment — in KisanKraft, a profitable India-based farming corporation.

The plaintiffs are fighting taxes on earnings that weren’t distributed to them by arguing about the definition of income, which could have broader implications, according to policy experts.
“This could have the biggest fiscal policy effects of any court decision in the modern era,” said Matt Gardner, a senior fellow at the Institute on Taxation and Economic Policy, who recently co-authored a report on the case.
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The case challenges a levy, known as “deemed repatriation,” enacted via the Republicans’ 2017 tax overhaul. Designed as a transition tax, the legislation required a one-time levy on earnings and profits accumulated in foreign entities after 1986.
While the 16th Amendment outlines the legal definition of income, the Moore case questions whether individuals must “realize” or receive profits before incurring taxes. It’s an issue that has been raised during past federal billionaire tax debates and could affect future proposals.

Ruling could affect pass-through businesses

Depending on how the court decides this case, there could be either small ripples or a major effect on the tax code, according to Daniel Bunn, president and CEO of the Tax Foundation, who recently wrote about the topic.
If the court decides the Moores incurred a tax on unrealized income and says the levy is unconstitutional, it could affect the future taxation of so-called pass-through entities, such as partnerships, limited liability corporations and S-corporations, he said. 

“You’ve got to pay attention to the way the rules are going to impact your business, especially if you’re doing things in a cross-border context,” Bunn said.
There’s also the potential for a “substantial impact” on federal revenue, which could influence future tax policy, Bunn said. If deemed repatriation were fully struck down for corporate and noncorporate taxpayers, the Tax Foundation estimates a $346 billion federal revenue reduction over the next decade.
However, with a decision not expected until 2024, it’s difficult to predict how the Supreme Court may rule on this case. “There’s a lot of uncertainty about the scope of this thing,” Gardner added. More

Social Security’s funds may run out in the next decade, which could lead to benefit cuts of 20% or more.
Traditionally, Congress has fixed those shortfalls by raising taxes, cutting benefits or a combination of both.
Now one lawmakers is pushing another potential solution to create a new separate fund that would invest in stocks on the program’s behalf.

Wand_prapan | Istock | Getty Images

The trust funds that Social Security relies on to pay benefits are “rapidly heading to zero,” according to the Center for Retirement Research at Boston College.
Those funds, which are typically invested in Treasury securities, are projected to run out in 2034, at which point just 80% of benefits may be payable.

As that date draws closer, that has prompted more discussion as to whether that money should also be invested in stocks.
“Theoretically, yes,” said Anqi Chen, senior research economist and assistant director of savings research at the Center for Retirement Research, which recently published research addressing the question.
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But the real-world answer is not necessarily clear-cut, Chen and other experts say.
The problem is whether the funds, which are already running low, may be able to come up with the money to invest in stocks while also paying the benefits it owes.

Those benefit obligations are growing as baby boomers age, with 10,000 individuals turning 65 every day.
There were 53 million Social Security beneficiaries in 2010, the year before baby boomers started turning 65, according to the Peter G. Peterson Foundation in New York, which focuses on fiscal and economic challenges facing the U.S.

This ‘big idea’ fix would rely on stocks

Sen. Bill Cassidy, R-La., has put forward another “big idea” fix that calls for investing money in stocks on the program’s behalf.
The proposal calls for raising $1.5 trillion that would be put in a separate fund and invested in stocks.
No Social Security trust fund dollars would be included in the plan. Instead, the separate $1.5 trillion investment fund may come from either borrowing the money, raising the funds from other parts of the budget or by selling government assets.
The investment would be held in escrow for 70 years, which would allow the funds to grow.

It always will have enough revenue coming in from the investments to pay scheduled benefits.

Sen. Bill Cassidy
Republican U.S. senator from Louisiana

Over time, the investment fund would get a higher return than the returns on Treasury notes, ranging from 1% to 4%, which may not beat inflation, Cassidy noted at a recent AARP forum of the future of Social Security.
Ultimately, 75% of Social Security’s deficit may be covered by the strategy, while it would be up to lawmakers to come up with a strategy to make up the difference.
“Never again will we worry about a Social Security shortfall,” Cassidy said at the AARP event. “It always will have enough revenue coming in from the investments to pay scheduled benefits.”

How government retirement funds use equities
1. Cassidy’s plan takes inspiration from other countries, including Canada:

The Canada Pension Plan, with about $570 billion in Canadian dollars, changed its investment approach in 1997 in response to the need for higher payroll contributions due to longer life expectancies, lower birth rates and lower real wage growth, according to the Center for Retirement Research. The plan raised payroll contributions and began investing some funds in equities. Now its portfolio includes a variety of investments, including stocks, bonds, real estate, infrastructure projects and private equity. The fund, which invests in Canada and globally, has had a 10% annualized net return over the past 10 years.

2. Certain U.S. programs have also implemented investments that incorporate stocks:

In the 1990s, the U.S. Railroad Retirement System moved to invest in equities after its trust fund grew to four times annual spending, according to the Center for Retirement Research. The portfolio, now with around $27 billion in net assets, includes stocks, real estate, private equity and private debt.
The Federal Thrift Savings Plan, with about $800 billion in assets, was created in 1986 and includes passive investments through index funds. Congress must approve the investments it can offer.

Financial industry experts who have evaluated the plan have said the return expectations are conservative and would have a negligible effect on the equity market, according to Molly Block, a spokeswoman for Cassidy.

Why experts are cautious

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While it would be up to Congress to approve any changes to Social Security’s investment strategy, experts question the inevitable risks.
Generally, one of the prerequisites for investing Social Security in stocks is having the money to do it. In the 1990s and 2000s, when the idea was previously discussed, the trust funds had more money available to invest, according to Chen.
Now, there may have to be a tax increase to not only shore up Social Security’s current funding shortfall, but also provide additional funds to be invested in equities.
“Theoretically, yes that could work,” Chen said. “But that seems politically very difficult.”

Borrowing money to invest in stocks for retirement is a risky move, regardless of whether it’s in an individual’s 401(k) plan or a government retirement plan, noted Andrew Biggs, senior fellow at the American Enterprise Institute.
“It’s basically taking a bet on stocks versus bonds,” Biggs said. “It’s not smart for an individual to do it, and we’re doing it on an economy-wide basis.”
Moreover, while a 4% or 5% risk premium can make a big difference over a 30-to-50-year time horizon, there’s no guarantee those terms won’t change along the way, which could interfere with Social Security as a guaranteed government program, noted David Blanchett, managing director and head of retirement research at PGIM DC Solutions.
“It’s just not realistic to expect that things wouldn’t change in the interim,” Blanchett said. “I’m incredibly apprehensive about the idea of investing Social Security type benefits in public equity funds.” More

As colleges are being forced to rethink their policies in the wake of the Supreme Court’s ruling against affirmative action, more schools are also choosing to end legacy preferences, adding uncertainty to the process.
Heightened uncertainty is driving students to cast a wider net, according to Christopher Rim, president and CEO of college consulting firm Command Education.
Rather than apply to a greater number of schools, find schools that are a better fit, experts say.

Brian Snyder | Reuters

With competition at an all-time high and admissions practices increasingly unclear, it’s not an easy time for college applicants.
As colleges are being forced to rethink their policies in the wake of the Supreme Court’s ruling against affirmative action, more schools are also choosing to end legacy preferences, adding uncertainty to the process.

“There’s a true perception that the process is getting more and more unpredictable,” said Eric Greenberg, president of Greenberg Educational Group, a New York-based consulting firm.
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Heightened uncertainty is driving students to cast a wider net, according to Christopher Rim, president and CEO of college consulting firm Command Education.
To boost their chances of getting in somewhere, Rim now sees high school seniors apply to as many as 20 schools. But that comes at a cost: Each application can be $60 to $100 to submit, depending on the school.
After adding up the fees associated with submitting that many college applications, along with ACT and SAT test reports, “at the bare minimum, you are spending $1,200 to $2,000 on application fees,” Rim said.

It’s understandable that college hopefuls want to hedge their bets, said Robert Franek, editor in chief of The Princeton Review. “At the upper tier, students are seeing their friends not get in and that’s crushing.”
However, “20 is far too many,” he added.
Still, students are applying to more schools to try to get a leg up, no matter the cost.
“We are seeing a large increase in the number of applications students are submitting,” Greenberg noted. Students apply to twice as many schools as they did a decade ago, he said. “People are saying ‘the more schools, the better.'”

There’s a true perception that the process is getting more and more unpredictable.

Eric Greenberg
president of Greenberg Educational Group

Roughly 40% of students are applying to 10 or more schools, up from 37% last year, according to Jenzabar/Spark451’s recent college-bound student survey, a trend also driven by the growing number of colleges that are now “test-optional,” which means students don’t need certain SAT or ACT scores to apply.
As a result, a small group of universities, including many in the Ivy League, are experiencing a record-breaking increase in applications, according to a separate report by the Common Application.
The greater number of applications is further fueling historically low acceptance rates at many top colleges.

Application volume spikes despite hefty fees

Ariel Skelley | Digitalvision | Getty Images

Application volume jumped 30% for the 2022-23 academic year compared to the 2019-20 school year, the Common Application found.
At the same time, more students were eligible for a fee waiver, although not all requested one.
Students can apply for the fee waiver but don’t always bother, Rim said. “This is valuable time during their senior year that they could be using on their applications.” Many colleges also offer a college-specific fee waiver, and SAT or ACT testing fees can be waived on a case-by-case basis.

A better approach to college applications

Piling on more applications doesn’t better the odds if students and their families are too focused on institutions with acceptance rates below 10%, Rim cautioned. “That’s not really how this works.”
Rather than applying to a slew of similar schools, which may all yield the same slim chance of success, the key is to identify a core list of different types of institutions with a balance of “safety” schools, “targets” and “reaches,” Greenberg said.

Since admissions tend to be less predictable now, focusing on a more balanced list of schools at the outset “is most likely to lead to the desired result,” he advised.
Further, finding a selection of schools based on which are the right fit for you in terms of cost, academics, campus life and other factors is also likely to make you a more attractive candidate to the admissions office, Franek said. “Applying to a list that’s truly a best fit for you is always going to be of value.”
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President Joe Biden announced on Wednesday that he’d approve $9 billion in student loan forgiveness for 125,000 Americans.
The relief is a result of his administration’s fixes to number of programs, including the income-driven repayment plans and Public Service Loan Forgiveness.

President Joe Biden holds a Cabinet meeting at the White House on Oct. 2, 2023.
Kevin Dietsch | Getty Images

President Joe Biden announced on Wednesday that he’d approve $9 billion in student loan forgiveness for 125,000 Americans.
The relief is a result of his administration’s fixes to number of programs, including the income-driven repayment plans and Public Service Loan Forgiveness.

More than $5 billion of the aid will go to 53,000 borrowers who’ve worked in public service for a decade or more; $2.8 billion of the forgiveness is for 51,000 borrowers enrolled in income-driven repayment plans; and another $1.2 billion of the cancellation will go to 22,000 borrowers with disabilities.
This is breaking news. Please check back for updates. More

Mortgage payments have become significantly less affordable for homebuyers, according to the Consumer Financial Protection Bureau.
Nearly a quarter of refinance applications were rejected in 2022 — up sharply from 14.2% in 2021.
oXYGen Financial CEO Ted Jenkin recommended that consumers focus on their debt-to-income ratio.

Prospective buyers attend an open house at a home for sale in Larchmont, New York, on Jan. 22, 2023.
Tiffany Hagler-Geard | Bloomberg | Getty Images

As high home prices and interest rates push up monthly mortgage payments, it’s harder for many consumers to even get a mortgage in the first place.
Last year, lenders denied loan applications due to “insufficient income” more often than any other point since records began in 2018, according to a new report from the Consumer Financial Protection Bureau.

Overall, 9.1% of home purchase applications among all applicants were denied in 2022, the consumer watchdog agency reported, higher than 8.3% in 2021 but a marginal decrease from 9.3% in 2020. Refinance applications were more frequently rejected, at a rate of 24.7% in 2022 — up sharply from 14.2% in 2021.
Insufficient income represented more than 50% of of denials for Asian American applicants, 45% for Black and Hispanic applicants, and approximately 40% for white applicants — up from below 40% for each of these groups in 2018.
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The CFPB also reported that the average cost of a monthly mortgage payment increased 46%, to $2,045 in December 2022, from $1,400 during December 2021. Given the rising cost of payments and mortgage rates — both of which have responded to the Federal Reserve’s rate hikes — “none” of the recent trends in income-based denials should “be a surprise,” said certified financial planner Barry Glassman, founder and president of Glassman Wealth Services in McLean, Virginia.
“In most cases, income did not increase at the pace of average mortgage payments,” said Glassman, who is a member of CNBC’s FA Council.

‘People are feeling squeezed on all sides’

The higher rates of income-based mortgage denials are not only attributable to higher mortgage rates, but also higher home prices, Bankrate senior industry analyst Ted Rossman said.
“It’s really a double whammy, especially for first time buyers who don’t have any equity that they can trade in,” he said.
It doesn’t help that consumers have been taking on more debt as inflation puts pressure on their budgets.

Rossman added that lenders are looking for applicants’ housing costs to make up no more than 28% of their gross income. Lenders often use a guideline called the 28/36 rule, which looks at how much of your income housing expenses and other debt take up. Ideally, your mortgage, property taxes and insurance should represent less than 28% of gross monthly income, and total debt — including your mortgage, credit cards and auto loans — shouldn’t exceed 36%.
To gauge how much house you can afford before you apply for a mortgage, focus on “three big letters” — DTI, or debt-to-income ratio, said CFP Ted Jenkin, the CEO of oXYGen Financial in Atlanta.
If your overall monthly debt, including auto loan, student loan and mortgage payments, totals more than 40% of your total income, you have a greater chance of being denied. If that’s the case, you may need to adjust your housing expectations, said Jenkin, who is also a member of CNBC’s FA Council.

DTI ratios are currently higher than 40% among Hispanic and white applicants, according to the CFPB.
Lenders also look at applicants’ credit scores, and the CFPB data points to that as another potential trouble area. The median credit score of applicants for loan refinances is now lower than the median credit score of applicants for home purchase loans, reversing a recent trend, the CFPB reported.
“I think people are feeling squeezed on all sides,” Rossman said. “And from a credit scoring standpoint, too, that’s another big part of this whole discussion.”

Consumers should monitor their credit scores and take steps to keep them in top shape. The FICO scoring model used by many lenders runs from 300 to 850, and the higher the better. Depending on the lender, you might need a score of at least 600, or as much as 660, to qualify for a loan, and a 760 or better to get the best-available rate.
“The difference between a 575 FICO score and a 675 FICO score could be as much as 1% on your mortgage rate,” Jenkin said.
That higher rate means a bigger monthly mortgage payment, he said, “and that could put you into the category of having insufficient income.” More

The bulk of holiday shoppers — 54% — expect to feel financially burdened this year, according to a recent Bankrate survey.
Despite these statistics, those who do their holiday shopping early set themselves up for financial success.
“You still have a few months and still have the opportunity to stock away some savings so that you’re not going into credit card debt,” said Ted Rossman, a Bankrate senior industry analyst.

David Paul Morris | Bloomberg | Getty Images

The end of the year doesn’t just bring autumn leaves and jack-o-lanterns, then mistletoe and the chance of snow — it can also bring on financial distress.
Nearly half of all consumers say their financial standing fluctuates seasonally — and December is the most cited month for experiencing financial distress, followed by November and January, according to a report by LendingClub Corporation and PYMNTS Intelligence.Meanwhile, 54% of holiday shoppers expect to feel financially burdened this year, anticipating overall high costs, according to a recent Bankrate survey.

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These statistics notwithstanding, holiday shoppers who start saving early for year-end purchases set themselves up for financial success, experts say.
“You still have a few months and still have the opportunity to stock away some savings so that you’re not going into credit card debt,” said Ted Rossman, a Bankrate senior industry analyst.

‘Deals start early’ for holiday shoppers

Nearly all Americans, 92%, are cutting back on their overall spending in some way, according to a CNBC and Morning Consult Survey.
To that point, many are already getting ahead of holiday expenses. Half of holiday shoppers plan to begin, or have already begun, making purchases before Halloween, according to Bankrate.

While some people may gripe about seeing Christmas trees in stores while it’s still 90 degrees out in some areas, “the fact that these sales have started early is an advantage,” said Rossman.
Some retailers are even debuting holiday discounts early. Target released members-only price cuts on Oct. 1 and BestBuy on Oct. 2, while Amazon and Walmart are expected to so Oct. 9 to 12, he added.”The fact that deals start early allows you to research the best options and spread out your cashflow,” said Rossman.

It’s best to pay now, fly later

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Booking holiday airfare is cheaper in October, as well. Domestic round-trip fares over Thanksgiving are averaging $268 per ticket, down 14% compared to last year. For Christmas, prices are about $400 round-trip, down 12% from last year, per Hopper data.
Shoppers looking into traveling for the holidays should book their flights by Oct. 14, Hopper lead economist Hayley Berg previously told CNBC.Buy gifts for friends and loved ones throughout the year to spread out the cost, said certified financial planner Carolyn McClanahan, founder of Life Planning Partners in Jacksonville, Florida. Additionally, if you have a particular gift in mind, keep an eye out for good year-end sales.
Overall, think through what your gift-giving budget should be ahead of time so it doesn’t create a  financial strain. 
“Starting early is better because that last-minute shopping ends up being very reactionary,” said McClanahan, who’s also a member of CNBC’s FA Council. “You end up spending more and buying less thoughtful gifts than if you actually put in the work on that front.”

3 ways to get ahead of holiday spending

Here are a few ways holiday shoppers can start preparing:

Start setting money aside. Save a portion of every paycheck between now and the end of the year. Banks’ “Christmas Clubs” are separate, short-term savings accounts where can consumers accumulate savings for holiday shopping and expenses, said McClanahan. If not opening a Christmas Club account, consider “parking your money” in short-term savings options that have high liquidity and benefit from high interest rates, such as money market funds.
Be careful with credit cards. You can reap credit card rewards and benefits so long as you pay each card off by the end of the month. Otherwise, you risk at stacking on additional debt for discretionary spending, especially as the average credit card rate is more than 20%, a record high. “We definitely want to avoid that,” added Rossman.
Take stock of unused gift cards. About half, 47%, of Americans have at least one unused gift card, and the average value is almost $200 per person, Bankrate found. Shoppers should “take stock of unused gift cards,” as they could give a head start in holiday shopping, said Rossman. More