Kahler Financial Group
Rick Kahler, MS, CFP®, ChFC, CCIM, president of Kahler Financial Group, is a life-long resident of Rapid City, South Dakota. He began his professional career in 1973 selling and appraising real estate. He founded Kahler Financial Group in 1981 and became the first fee-only Certified Financial Planner® in South Dakota in 1983. He is on the faculty at Golden Gate University where he teaches their Facilitating Financial Health graduate course.
His firm, specializing in the integration of financial coaching, counseling, and traditional financial planning, attracts a nationwide clientele. Rick specializes in investment advising and financial planning services for business owners, professionals, and retirees.
In 2009 BusinessWeek named him one of the top 15 most experienced planners in the nation. In 2009, Kahler Financial Group was recognized by Wealth Manager magazine as the largest financial planning firm in a seven-state region. In 2012 Investment News named Rick one of the top 15 advisers for financial advisers to follow on Twitter.
Rick graduated from the American College, Bryn Mawr, PA, in 1988, earning the Chartered Financial Consultant (ChFC) degree. In 1984, he was admitted to the Registry of Financial Planning Practitioners by the International Association of Financial Planners. He obtained his master’s degree in personal financial planning in 1999.
He has served on and chaired the South Dakota Investment Council (managing $6 billion) and has served nationally in several leadership capacities with the Financial Planning Association. Rick is also a nationally renowned speaker and educator. His workshops and seminars draw some of the world’s wealthiest and most influential people.
BS, Financial Planning, National American University
The “Fight For $15” is gaining national attention and becoming an issue in the presidential race. Hillary Clinton has expressed strong support for a national minimum wage of $15, more than double the current $7.25.
Missing in the national debate over the minimum wage is the recognition that taxes and living costs vary enormously from state to state. The dollar amount of the hourly wage in any given state isn’t as important as what workers have left after paying taxes and living expenses. A $15 hourly wage in a state with high taxes and a high cost of living is hardly equal to the same $15 hourly wage in a state with low taxes and a low cost of living.
To compare the purchasing power of a $15 minimum wage, I adjusted the wage for state and local taxes and for the cost of living, using data from the Council for Community and Economic Research as presented by the Missouri Economic Research and Information Center. (You can see the complete rankings with and without adjustments at the end of this post.)
I selected Washington DC as my base location for comparison, as it has the second highest cost of living in the US behind Hawaii. Washington DC is also representative of the cost of living and taxes in many major metropolitan areas, where the drive for a $15 minimum wage seems strongest.
What I found was that location makes a huge difference. For example, the cost of living (COL) in Washington DC is 147.6% of the national average, with state and local taxes costing 9.6% of income. Mississippi’s COL is 84.3% of the national average, with state and local taxes costing 8.4%. After adjusting for cost of living and taxes, the purchasing power of a worker earning $15.00 an hour in Washington DC equals that of a worker earning $8.46 an hour in Mississippi. In South Dakota, a worker earning $9.67 an hour has the same purchasing power as one earning $15.00 an hour in Washington DC.
Conversely, a worker earning $15 an hour in Mississippi would have to earn $26.60 an hour in Washington DC to have the same purchasing power. For a South Dakota worker, $15 an hour has the same purchasing power as $22.66 an hour in DC. Mandating that employers in Mississippi pay $15 an hour would be equal to forcing employers in DC to pay $26.60 an hour.
Clearly, while a $15 minimum wage may be reasonable in Washington DC, a flat $15 national minimum wage is incredibly unfair, as it does not take into consideration local variations in COL and taxes. Currently, 51.1 million workers earn less than $15 an hour. Forcing rural small businesses to raise wages as high as an equivalent wage in DC of $26.60 will cost many employees their jobs and raise costs for everyone.
The money to double many worker’s wages wouldn’t simply come out of profits, as many businesses don’t have enough profit to absorb the increased costs. Nor would it realistically come from just raising prices. Higher prices would carry a double whammy: both negating the raise many just got and meaning fewer consumers would choose to purchase the product or service.
Instead, a $15 national minimum wage would make jobs even harder to get, as employers would necessarily need to streamline, outsource, and hire only the most talented workers.
A federal minimum wage is a floor, not a ceiling. Of necessity, it needs to accommodate the states with the lowest cost of living. States need to remain free to set their own minimum wages according to the needs of their own workers.
If you take a distribution of Roth IRA earnings before you reach age 59½ and before the account is five years old, the earnings may be subject to taxes and penalties. You may be able to avoid penalties (but not taxes) if you use the withdrawal (up to a $10,000 lifetime maximum) to pay for a first-time home purchase.