Ind., Mich., N.J., N.Y., Ohio and Pa. are all headed in that direction.
But others are, too: Ariz., La., Md., Mo., N.D., Utah, Wis. and Va.
They’ll hit a wide swath of industries: Utilities...from power
to water. Nev., for example, may apply its 6.5% sales tax to natural gas.
Business assistance, including advertising, printing, accounting,
janitorial services, debt collection, telemarketing, crating and moving.
Also: Carpentry, construction, plumbing, painting, landscaping,
deliveries, car repairs, equipment leasing and sporting event tickets.
Maine, Mich. and Ill. are looking to add a sales tax to temp agency help,
telephone answering, appliance repair, health clubs and lawn mowing.
Most states will move slowly so that businesses
and consumers don’t head to neighboring states
to dodge new taxes. They’ll start with services
that aren’t portable, such as construction.
It’s more than a coincidence that the only state
that already has a tax on ALL services is one
where going next door isn’t possible: Hawaii.
Not all is bleak on the local tax horizon.
Real estate rates will be capped or reduced
in more than a dozen states, including Ark.,
Fla., Idaho, Ill., Ind., Mont., N.J. and Vt.
 Don’t fret over the Feb. employment report. Sure, the job gain
of 97,000 marked the most meager performance since Jan. 2005.
But it is heavily skewed by 62,000 jobs shed in the construction sector.
Weather played a big part in that by delaying building projects.
Service industries, the heart of the job market, are humming.
Feb.’s gain of 168,000 service jobs actually trumped Jan.’s by 48,000.
We see a total of 1.5 million jobs added this year, buoying consumers.
The bad news: Wages continue to rise quickly and unemployment
is a very low 4.5%. Firms will probably see more upward pressure on pay.
 Lower costs for metals will cheer up builders and manufacturers.
They can look forward to reduced prices for wiring, tubing, tools
and many more items...a help for profit margins as economic growth slows.
One major benefit: Cheaper stainless steel as the tab for nickel,
a main ingredient in this widely used steel, drops about 30% this year.
We see stainless at $3000 a ton by year end, down $1000 a ton from now.
Weaker demand, especially from the auto sector, will also factor in.
Copper is headed for a 6% decline to about $2.50 a pound.
Its price is at the point where substitute products made from plastic
and aluminum are competitive, notably for use in electrical products.
Mixed news on metals for battery makers: They use a lot of zinc,
which is likely to hold steady around its current price of $1.70 a pound.
This follows a doubling in the price of zinc over the past two years.
But lead, used in smaller quantities in batteries, will fall about 25%
in response to stepped-up output by mining companies in the past year.
Figure on airfares rising 5% between now and year end,
with business class averaging a bit more and economy tickets a bit less.
But fare cuts are possible on a few routes as some major carriers
use newfound financial cushions to take on lower-priced competitors.
In Denver, for example, United may challenge Southwest and Frontier.
US Airways could square off against Southwest on Philadelphia routes.
Competition on transatlantic routes could heat up by fall,
thanks to a pending "open skies" agreement with the European Union.
Though previous such deals have foundered, this one is a good bet.
Increases in legal fees show no sign of slowing in coming years.
Average fees will rise at about one and a half times the inflation rate.
Blame more corporate compliance regs, heavy corporate dealmaking
and plain old economic growth for brisk demand for legal services.
The legal supply side...newly minted lawyers...is far from keeping up.
 Asian-led stock volatility comes at a good time for the IMF,
International Monetary Fund. The Washington-based global lender
is on the defensive, fighting critics who claim it is no longer needed.
Demand for its assistance has tanked as once-big debtors such as Brazil
tap growing foreign exchange kitties to pay off their IMF loans early.
The IMF’s new fund-raising plans are now likely to get a boost.
Stock market swoons originating in Asia, though not crisis-level events,
support IMF warnings against complacency about global financial risks.
The U.S. and other IMF shareholders will be reminded of its useful role
as a neutral party for sniffing out...and snuffing out...brewing crises.
It may get the OK soon to sell some of its $63 billion in gold
and invest the proceeds to generate a sustainable stream of income.
The gold would be sold very gradually to avoid a price crash.
One thing the Walter Reed Army Medical Center scandal ensures:
Congress will finally upgrade the menu of veterans’ benefits.
Walter Reed’s problems mostly involve the care of active personnel,
not those discharged. But the scandal has lent weight to complaints
by former soldiers and their families of shoddy government treatment.
Some likely enhancements at the Department of Veterans Affairs:
New caps on the annual fee hikes veterans pay for health care
to make sure they don’t outstrip rises in disability pay or pensions.
A better deal for sufferers of post-traumatic stress disorder.
Lawmakers are discussing a package of about half a billion dollars
to finance more counseling, research and public education programs.
Ditto for vets with traumatic head injuries. Roadside bombs
in Iraq are spawning an epidemic of vets grappling with brain trauma.
Also...a sweetened GI Bill. It will boost tuition support
and provide education benefits to Reserve and National Guard vets.
Can the VA manage these additional responsibilities? Not now.
The creaky agency needs a thorough overhaul after decades of neglect.
It faces roughly 600,000 backlogged medical claims filed by vets.
Congress WILL approve money to expand the VA’s staff
and modernize its IT. But bringing the VA up to speed will take years.
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 Got a job for a Marine? The Defense Department has a program,
Hiring Heroes, aimed at finding employment for wounded soldiers.
Some 1000 veterans of action in Iraq and Afghanistan have landed work
through dozens of regional job fairs organized by the Pentagon.
Details of the program are available at www.military.com/support.
The Family and Medical Leave Act is under the microscope
at the Labor Department, which recently invited comments on FMLA regs.
Expect changes in the FMLA’s "intermittent leave" provisions.
They cover time taken for medical procedures such as chemotherapy.
Tighter definitions of serious health conditions are likely.
Employers say the broad range of conditions covered by intermittent leave
has led to a huge rise in absences, often taken with little or no notice.
Unions and other worker groups are sure to fight any changes in the FMLA.
But the White House wants to make revisions before Bush leaves office.
 The insurance industry is likely to lose its antitrust exemption.
Look for Congress to give the Federal Trade Commission the power
to investigate charges of unfair trading practices by insurance firms.
Insurers are in the hot seat after allegations of collusion
related to Hurricane Katrina. Some policyholders have accused insurers
of behind-the-scenes deals that made it easier to deny property claims.
The move should guarantee greater competition in premium rates.
World travelers are having trouble obtaining life insurance.
Global road warriors may be denied supplemental policies if they travel,
even only occasionally, to places on the State Department’s warning list.
It now covers 31 nations, including Saudi Arabia, Colombia and Israel.
States will make it easier to get life policies by passing laws
barring insurers from disqualifying applicants on travel grounds.
A few states...Calif., Colo., Ill., Md. and N.Y...have already done so.
 States are bulking up trade promotion budgets after draining them
in recent years. On average, states are spending $2.6 million
on promotion efforts, a jump of about $1 million from a year earlier.
Indications are that states will keep trade funding high next year.
State money will partly offset belt-tightening in Washington,
ensuring that small firms continue to get help in prospecting abroad.
Pa. is the new promised land for trade promotion, with a budget
totaling a massive $20.7 million, more than triple last year’s.
Others that spend a lot: Md., Ga., Va., Ill., Ohio, Ala. and S.C.
Look for Calif. to rejoin the flock in 2008. The top trade state
zeroed out promotion money in 2003 at the height of a budget crisis,
after spending $7 million on it before. Expect that level to be restored.
Is your foreign business partner also working with Iranian firms?
It’s worth trying to find out, especially if your company trades
or invests in goods with potential nuclear applications...machine tools,
electronics, specialty metals, industrial chemicals and design software.
Congress will target foreign companies with Iranian connections.
A pending antiterrorism law is likely to include much stiffer sanctions
against them...seizing their U.S. assets and nullifying their contracts
with U.S. companies. The law could also hit banks, insurers and shippers.
The aim: Block Iran from buying supplies for its nuclear program.
Companies in Germany, the United Arab Emirates, China, Italy, France,
South Korea and Russia are most likely to have business links to Iran.
Consumer demand is returning in Europe after an extended absence.
Recent economic reforms, particularly in economic heavyweight Germany,
have sparked more hiring, bolstering individuals’ incomes and spending.
Consumers will help keep the economy on an even keel this year,
with euro-zone growth at around 2.5%...robust by European standards.
U.S. industries likely to benefit: IT services, electronics,
optical equipment, telecommunications services and medical equipment.
 Vice President Dick Cheney won’t be toppled by the Libby verdict.
But he truly will be a lame duck, now that his former top aide,
I. Lewis Libby, has been convicted of perjury and obstruction of justice.
Cheney’s influence on White House policy was already waning.
As an architect of the Iraq war, setbacks there sapped his credibility.
His hard-line foreign policy approach is clearly out of favor.
Bush is taking more-conciliatory tacks with Syria, Iran and North Korea.
The winner in all this: Secretary of State Condoleezza Rice.
The diplomat-in-chief’s star shines brighter every time Cheney’s dims.
But Rice will now be under more pressure to show she can get results...
notably, an international solution to Iraq and Israeli-Palestinian peace.
 P.S. Kiplinger’s new online Business Resource Center
offers a wealth of new features, including a subscriber-only forum,
an opportunity to pose questions directly to our editors, video clips
and expanded forecasts. It’s at www.kiplingerbiz.com starting March 10.
For editorial information call us at 202-887-6462
or write us at
askkip@kiplinger.com
©2007 The Kiplinger Washington Editors
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