Accuracy, Precision, and Soft Shell Clams
In this edition of the Flying Point Update we're going to talk a little bit about the idea of accuracy versus precision, discuss the implications of an increased SALT cap, and learn about soft shell clams.
Top of Mind
Flying Point Advisors has a bit of a natural annual cadence in terms of client work flows. During the summer and early fall, we tend to spend more time on forward looking financial planning and business analysis projects. In my experience, predictive and forward-looking analysis is one part art and one part science. Whenever I spend a lot of time predicting the future, I find myself thinking about the idea of accuracy versus precision.
For those who haven't thought about this distinction since high school physics, precision refers to how close repeated measurements are to each other, while accuracy refers to how close those measurements are to the true value. You can have precise measurements that are consistently wrong, or accurate measurements that vary widely around the correct answer.
In financial planning and analysis, this distinction matters more than you might think. Software packages and analysis techniques produce financial projections with incredibly precise outputs—down to the exact dollar—based on assumptions that are inherently inaccurate. A Monte Carlo analysis might tell you there's exactly a 87.3% chance of meeting your goals, or a business valuation might conclude your company is worth precisely $2.473 million, but that level of precision can create a false sense of certainty about an inherently uncertain future.
The reality is that small changes in key assumptions—growth rates, market conditions, interest rates, or regulatory changes—can dramatically alter outcomes. Rather than focusing on hitting precise future targets, I find that the better approach is to understand the major levers that determine the results of a prediction. Is the analysis most sensitive to revenue growth assumptions? Interest rate changes? Market multiples? When you understand these key drivers, you can make better decisions and build flexibility into your plans, rather than chasing false precision.
This doesn't mean financial planning is guesswork, but it’s important to recognize the limitations of any projection that extends decades into the future. Good planning involves making the best assumptions we can based on historical data and current conditions, stress-testing those assumptions against different scenarios, and understanding trade-offs.
The most dangerous plans, financial or otherwise, are often the most precise ones—those that rely on everything going exactly according to plan with no room for life's inevitable curveballs.
Worth Knowing
Speaking of tax planning assumptions, one provision in the recent tax changes that will significantly impact many families is the increase in the State and Local Tax (SALT) deduction cap from $10,000 to $40,000.
For context, Maine has relatively high state income taxes (with a top rate of 7.15%) and property taxes that often exceed the national average. Many of our clients have been hitting the $10,000 SALT cap.
This dramatic increase creates significant planning opportunities. Families who were previously capped at $10,000 might now be able to deduct their full SALT burden, potentially reducing federal taxes by several thousand dollars annually. However, there's an important caveat: the $40,000 cap phases down to $10,000 for taxpayers with modified adjusted gross income over $500,000, creating what some experts are calling a "SALT torpedo" - an artificially high effective tax rate between $500,000 and $600,000 of income.
However, this is also a perfect example of accuracy versus precision in tax planning. While we can calculate the immediate impact fairly precisely, the long-term value depends on many variables we can't predict: future Maine tax rates, property value changes, federal tax rate adjustments, and whether this provision remains in place (it's currently set to revert to $10,000 in 2030).
The smart approach isn't to optimize every decision around the current SALT cap, but rather to understand how the change affects your overall tax picture and build that into your broader financial strategy.
Mark Your Calendar
September 15th: Q3 estimated tax payments due, plus final deadline for calendar year S-Corps and partnerships to file 2024 returns (with extension)
October 15th: Final deadline for individual returns with extensions
Now's a good time to review year-end tax planning strategies, especially with all the recent tax changes.
Maine Wildlife Facts
I took Will and Frank clam digging last week. Frank quickly discovered that he could paint himself with mud and proudly declared “I am the mud man!” Since our outing, we’ve learned a few fun facts about soft shell clams.
We were finding clams about 6-12 inches below the tidal mudflat surface near Wolfe’s Neck, but soft shell clams can dig down 2-3 feet into the mud and sand, using their powerful foot to create burrows. They extend long siphons up to the surface to filter feed on plankton and algae. When threatened, they can quickly retract these siphons, which is why you often see small holes suddenly appear and disappear in the mudflats at low tide.
Maine produces about 80% of the soft shell clams harvested in the United States, with most coming from the mudflats of Midcoast Maine. The industry is Maine's second most valuable fishery, generating over $15.4 million in 2024 - and remarkably, virtually all soft shell clams are still harvested by hand using traditional methods that date back generations. Since 1957, Maine law has restricted clam harvesting to hand implements only, such as steel-tined hoes or hand-picking in softer mudflats. While experimental clam farming using protective netting is being tested to combat invasive green crabs, the vast majority of Maine's clam harvest still comes from wild populations dug by individual harvesters working the tidal flats.
The boys, less interested in economic facts, were amazed to learn that these clams can live 25-30 years, which helps explain why the same clam beds have supported harvesting for thousands of years. Archaeologists have found massive shell middens left by indigenous peoples throughout coastal Maine.
For anyone that thinks a fried clam plate is overpriced, I strongly suggest you spend an afternoon digging for clams with a 3-year-old and a 6-year-old. It's exhausting work that makes restaurant prices seem entirely reasonable.
These Maine wildlife facts have been brought to you by Will (almost 7) and Frank (3), Flying Point Advisors' on-staff naturalists.
Questions about any of this? Just reach out - I read every email and love hearing from you. Thanks for reading. You'll hear from me again in about two weeks.
-Mike