INVESTING
How
federal government jobs
affect the economy
T
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he federal government is the
countryÕs largest employer, with about 14.6 million employees and contractors,
including the postal and military services. Workers employed by the federal
government play a vital role in homeland security, representing U.S. interests
abroad, enforcing regulations, and administering domestic programs and agencies.
Most federal
government jobs arenÕt located in the Washington, D.C., area. In fact, 90
percent of jobs are located elsewhere. They provide services ranging from
weather forecasting, education, banking, and ensuring the freshness and safety
of foods on grocery shelves to managing natural resources, researching new
vaccines, making traveling by highway or air possible, and much more.
The jobs have a
significant impact on their communities. For example, a regional
council of governments organization looked at the federal employment impact
on the four-county region around Sumter, S.C. It found not only did the region
come to depend on those dollars but the workers were also better paid than
those in the private sector, with the federal government paying on average $200
a week more. The study also found that government spending was proportionally
greater in the regionÕs more rural areas and added stability to the entire
region in bad economic times.
In a tight job
market, federal government employment opportunities provide an alternative for
job seekers. With the average unemployment rate at 9.2 percent this year and
with 6.7 million payroll jobs lost since the recession began, many people see
federal jobs as a smart recession-proof career route.
Unlike private
sector jobs, federal jobs are generally less susceptible to cyclical
fluctuations in the economy, according to the Bureau of Labor Statistics. Even
in the event of layoffs, federal jobs have a higher retention standing than
private sector jobs.
In fact, a
recent study showed the number of federal civil servants and employees working
for government-funded contractors and for organizations that receive government
grants has been increasing and the hiring forecast remains fairly positive.
Also, about 550,000
federal employees are expected to retire from the government between 2007 and
2012 and need to be replaced. In addition, the American Recovery and
Reinvestment Act, or the stimulus law, is expected to create around 600,000 new
government jobs by 2012.
TAX AND LEGAL
Common
tax mistakes of the self-employed
any self-employed people are
do-it-yourself people not only in business but also in paying their taxes. But
self-employment tax rules are somewhat more complicated than the rules that
apply to the employed. As a result, many commit mistakes that lead to costly
fines and penalties from the IRS as well as to paying more than required.
The
self-employment tax (SE tax), which is filed with the Individual Income Tax
(1040) return, is a Social Security and Medicare tax for individuals who ork
for themselves. It is similar to the FICA taxes withheld from the paychecks of
most employees. However, because self-employed individuals are both employers
and employees, they are responsible for paying all the FICA taxes.
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Most people who
are newly self-employed forget that they now have to cover both the employer
and employee portion of Social Security and Medicare tax. Instead of the Social
Security employee-only tax rate of 6.2 percent, the SE tax rate is actually
12.4 percent. The SE tax rate for Medicare is 2.9 percent and not the 1.45
percent Medicare tax rate for employees.
Another common
mistake made by the self-employed is missing out on legitimate deductions
because they are not aware that they qualify for these write-offs.
Consequently, many business owners end up paying more than they owe the
government. Here are examples of deductions that are available to the
self-employed:
á
Payments made to 401(k), IRA,
KEOGH, or SEP and other qualified retirement plans.
á
A portion of rent, mortgage
payments, utilities and maintenance for businesses operating partially or
completely in any part of the ownerÕs home (for example, a room that has been
converted into an office).
á
Cost of toner for printers, reams
of paper, shipping expenses, postage, software, pens, pads and other office
supplies used directly for business.
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Cost of advertising materials for
radio, TV, magazines, the Internet and other media.
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Cost of cellular and telephone
calls made for business purposes.
á
Cost of the Internet or a Web page
for business purposes.
There are many
other expenses that can be claimed as Òbusiness expensesÓ and are therefore
tax-deductible. However, there are various rules that apply to the different
deductions and it is important to understand these rules before incorporating
them into the tax returns.
Mississippi Benefits Consultants has teamed with a large group of CPAÕs to provide
clients with a Òsecond opinionÓ Tax Review for only $30. This is fully refundable if we do not find a
mistake. Call us for an appointment to take advantage of this offer.
HEALTH AND WELL-BEING
Does
preventive care save money?
TV commercial for a new
prescription drug for heartburn shows a guy suffering from the condition after
eating a chili cheese dog. ÒStop eating the chili cheese dog!Ó responded
Jonathan Harris, a managing editor for the philanthropic group Causecast. ÒLetÕs
put down the chili cheese dog and take control of our health.Ó That, in a
nutshell, is the philosophy behind preventive care.
Chronic diseases
such as diabetes, cancer and heart disease, as well as their preventable
underlying causes such as obesity, smoking, alcohol use, poor diet and lack of
exercise, account for approximately 38 percent of all deaths in the United
States, according to Dr. Susan Blumenthal, former assistant surgeon general.
They also account for 75 percent – $1.5 trillion each year – of
U.S. health-care spending. Although prevention has been proven to reduce the
incidence of chronic disease, the U.S. governmentÕs investment in prevention
has remained low.
President Barack
Obama has said he would require insurance companies to pay for cholesterol
tests, cancer screenings, mammograms, colonoscopies, vaccines, and other
routine checkups and preventive measures as one of the consumer protections in
any health-care reform legislation.
Although few
would dispute that preventive care saves lives, the Congressional Budget Office
(CBO), a nonpartisan agency that estimates the cost of legislation, said
expanding the use of preventive measures and screening tests would actually
increase medical spending overall. The CBO cited The New England Journal of
Medicine 2008 review that found that about 80 percent of the hundreds of
preventive services included in the study added to the costs.
Preventive care
doesnÕt bring down cost because the tests themselves are costly and often lead
to more doctorÕs visits and procedures.
A separate study
found that preventive services such as measuring the cholesterol level of
people at high risk for heart disease would cost almost 10 times as much as the
savings. As a result, the countryÕs total medical bill could increase by 162
percent.
But even the CBO
maintains that there is no reason to abandon preventive measures if the country
decides they are worthwhile and as long as the cost is recognized. ÒJust
because a preventive service adds to total spending does not mean that it is a
bad investment,Ó CBO Director Douglas Elmendorf said. ÒExperts have concluded
that a large fraction of preventive care adds to spending but should be deemed
Ôcost-effective,Õ meaning that it provides clinical benefits that justify those
added costs.Ó