David Banner

When we think about alleviating the economic woes of the Black community, what can we learn from the actions of LeBron James?

When analyzing the political stagnation of the Black community, what role is played by our community’s undying loyalty to the Democratic Party?

How can the “360 deals” (popular in the music industry) shed light on the inability of the Black community to prosper?

The answers to these seemingly unrelated questions hold important keys to creating a different reality for the Black community in 2012. The lessons we can learn from each of these scenarios are critical to both understanding and allaying the economic and political ills currently plaguing our community.

As we enter the last days of 2011 many have began formulating their New Year’s resolutions. But, unlike most people who are crafting individual goals for 2012, my thoughts are more collective in nature—they are thoughts about New Year’s resolutions for the Black community as a whole.

Scenario 1: The Curious Case of LeBron

When LeBron James made the decision to leave the Cleveland Cavaliers after his contract ended, many questioned his loyalty to the city and the fans. Some denounced the “greediness” that supposedly motivated his interest in other teams, and still others condemned his signing with the Miami Heat as being “bad for basketball.”

In actuality, the actions of LeBron James—as well as Dwyane Wade and Chris Bosh, who assisted in bringing him to the Heat—displayed a degree of independence and autonomy previously unseen in the NBA. In the past, superstar athletes thrived off the benefits that come with being the one “great” player on a team full of “good” players. Additionally, superstars were content viewing the superstars on other teams as “rivals” to be defeated in competition. But, with the actions of LeBron, the self-centeredness of the “great” player was replaced by the common goal (an NBA championship) of multiple players and one-time “rivals” who had been transformed into teammates, working together toward that common goal.

Needless to say, Black men organizing, thinking independently and acting collectively has always been met with opposition, especially in the NBA where the owner-player relationship is often reminiscent of the owner-slave relationship on the plantations in the antebellum south.

Scenario 2: Democratic Loyalists

The undying loyalty of the Black community to the Democratic Party came bubbling to the surface recently with the comments of Republican Presidential candidate Herman Cain. Pointing out this ironclad allegiance, Cain characterized Black people as being “brainwashed” into supporting Democrats and Democrats only. Whatever you think of Cain’s use of the term “brainwashed” the history is clear. Since the early 1960’s, 80-90% of the Black community has given their support to the Democratic Party. To be sure, the reasons for our support of Democrats are also clear: Democrats have historically championed civil rights, affirmative action, education and other social programs that benefit our community. But, Cain’s partisan politics aside, even Black Democrats are beginning to question the loyalty given by the Black community to the Democratic Party. The following quote from Jack & Jill Politics summarizes this rethinking:

“Although the Democratic Party is the better choice, our unconditional loyalty to the Democratic Party has weakened our ability to negotiate and further our interests.”

In truth, the Democratic Party has withered in its support of traditionally Democratic issues like social security, welfare, civil liberties and the support of “Main Street” over Wall Street. Add to this the complete disregard by the party (and the current administration) of issues impacting the Black community and we begin to see that while we’ve been unwavering in our support of the Democrats, the Democrats have begun to abandon us.

Our unrelenting support of a party that, at best ignores, and at worst undermines our community’s needs continues to “weaken our ability to negotiate and further our interests.” And, to the Democratic Party, it renders our support for them a foregone conclusion.

Scenario 3: The Infamous 360 Deal

Today’s music industry has been engaged in a virtual scavenger hunt for revenue streams. Facing plunging profits and having resisted instead of embraced entry into the digital age, the music industry has recently resorted to more “creative” and exploitative ways of securing profits—“Multiple Rights” contracts, otherwise known as “360 Deals.”

Simply put; in a 360 deal a music company signing an artist receives a percentage of EVERY aspect of said artist’s career, not just the recoupable costs related to the promotion, recording, publicizing and sales of an album. For example, a typical 360 deal now allows a company to receive a percentage of the money an artist makes on touring, merchandising, endorsements, TV and film appearances and ANY OTHER REVENUE generated by the artist’s “360 degree” sphere of activity.

To further highlight the oppressive nature of 360 deals:

“Back in the day, labels took roughly 87% of the pie while giving the artists 12% of the money AFTER the artist paid back everything spent on them from that 12% share. This means that if the artist sold $500,000 worth of CDs, and it cost $50,000 to market and promote that CD (a very low example), the artist share of $60,000 (12% of $500k) would be divided between paying the label back that $50,000 and a check for the remaining $10,000. The label would receive $490,000 for its investment and belief in that artist while the artist made $10,000.”

Today’s 360 deals continue to drain money away from artists by taking from the revenue (touring, endorsements, merchandising etc.) that artists have traditionally used to make up for their menial 12% share on album sales. For the artist, these new “Multiple Rights” deals have made a bad situation worse.

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Miami's Big 3 (Image: Getty)

New Year’s Resolutions

So, in 2012, what can the Black community learn from each of these three aforementioned scenarios? The answer is… much.

Lesson 1

The story of LeBron, Dwyane and Chris is a lesson in uniting of the now fractured Black community toward the common goals of economic and political independence. LeBron’s story also represents the shedding of the “crabs in a barrel,” “dog eat dog” pursuit of individual advancement and the adoption of group cooperation toward a collective goal. Much like LeBron, Dwyane and Chris, the Black community, collectively, has both the skills and the resources to act independently.

New Year’s Resolution 1: Assert Our Economic and Financial Independence Through Group Economics

A recent report that garnered much attention highlighted the immense spending power of the Black community. According to the study, by the year 2015 the total spending power of the Black community will exceed $1 trillion. Put simply, as Black people we spend an amount of money that makes us the equivalent of the 16th largest nation on earth. But, as our present condition clearly shows, merely HAVING money to spend doesn’t equate to having “power” or experiencing “progress.” The fact of the matter is we don’t practice group economics. What good is having the spending power of $1 trillion if that money only circulates within the Black community zero to one time? Other economically successful communities (Hispanic, Asian and Jewish) see their dollars circulate within their communities 6, 9 and 12 times before it’s spent outside of their community.

Their practice of group economics has catapulted them to economic self-sufficiency and independence, and following the cooperative and goal oriented example of LeBron can eventually lead the Black community to self-sufficiency and independence in 2012.

Lesson 2

Our relationship with the Democratic Party is a clear-cut example of the dangers of not leveraging our influence and our voting strength. To represent such an integral and dedicated block of votes while continuously having our specific interests ignored is the height of arrogance on the part of the Democratic Party and a gross display of irresponsibility on the part of the Black community.

New Year’s Resolution 2: Assert Our Political Independence by Demanding Our Interests Be Addressed

Some in our community have argued that presenting a “Black Agenda” to politicians is unrealistic. “President Obama is the President for ALL people in America, not just Black people,” so the argument goes. As a result, we shouldn’t expect him—or his party—to specifically target our community’s needs with policies and legislation. To be sure, the President should indeed be an advocate for all segments of our society. But, advocating for all segments of society actually necessitates addressing the needs and interests of a major segment of that society—and a major base of support for the Democratic party: Black people. Add to this the fact that the President already has a history of advocating and signing legislation specifically targeting other subgroups, (repealing Don’t Ask Don’t Tell, tax incentivizes for businesses hiring returning veterans and signing the Lilly Ledbetter Fair Pay Restoration Act) and there no longer remains any reason to absolve the President or the Democratic Party from tailoring policy and legislation to address our community’s interests and needs.

The fact that many in the Black community dismiss (outright) the notion of holding the Democratic Party accountable to our interests while other groups consistently have their interests met is reminiscent of the words of Dr. Carter G. Woodson, who wrote:

“If you make a man feel that he is inferior, you do not have to compel him to accept an inferior status, for he will seek it himself…you do not have to order him to the back door. He will go without being told; and if there is no back door, his very nature will demand one.”

Ninety-six percent of Blacks who voted in the 2008 Presidential election voted for President Obama. While support for Obama has dwindled among the Whites, women, younger voters and liberals who previously supported him, his support in the Black community has not waivered. What is unmistakable is that without the support of the Black community there is no President Obama and there is no Democratic Party.

That support should not come cheap and it should not be a foregone conclusion.

Lesson 3

The lesson of the 360 deal encompasses the lessons of both LeBron and our unreciprocated political support. Just as the music industry feeds off the entire actions, works and efforts of an artist, political parties, as well as businesses outside of our community, have consistently fed off our actions (our votes), our works (our productivity) and our efforts (our spending). This results in the vast majority of the Black community’s 360-degree sphere of activity parlaying off for the betterment of other communities but to the detriment of ours.

Fueled by these lessons from the realms of sports, politics and the music industry, it is my hope that 2012 witnesses a monumental shift in the affairs and the condition of the Black community. With respect to our politics and our finances, we possess both the leverage and the dollars to bring about this change. It is my sincerest hope that, in implementing my proposed resolutions, we can regain what we so long ago lost—our sense of culture, our sense of community and our sense of self.

As I reflect on the profound possibilities within our grasp I’m reminded of two of the greats from our past. In 2012 let us always remember the words of the Honorable Marcus Mosiah Garvey who said, “Up! You mighty race, you can accomplish what you will.” And in 2012 let us also be reminded of the words of the Honorable Elijah Muhammad, who told us simply to, “Do for self.”

In short, let us make 2012 the year of group loyalty, group independence and group cooperation.

The clock is ticking.

If President Obama and congressional leaders don’t reach an agreement to increase the $14.3 trillion debt ceiling by August 2 then the United States will wind up becoming a deadbeat nation unable to meet its obligations for the first time in history. A number of leading economists and policymakers, including Treasury Secretary Timothy Geithner and Federal Reserve Chairman Ben Bernanke, warn that the U.S. would face nothing less than a “huge financial calamity” far greater than the meltdown of 2008.

Washington officials have become increasingly concerned that the nation is headed for crisis. And with good reason. In a recent interview with CBS News, the president maintains he cannot guarantee that 70 million checks will be delivered to social security beneficiaries, veterans, folks on disability and the like come August 3. And Moody’s Investors Service announced on Wednesday it has put the AAA credit rating of the U.S. government on review for a possible downgrade based on the likelihood the debt limit will not be raised by next month’s deadline.

The president is once again involved in talks with the GOP that can only be characterized as hostage negotiations. In December 2010, he was forced to extend the Bush tax cuts for wealthy Americans for two years as a means of avoiding a middle-class tax increase that could have derailed economic recovery and extending unemployment benefits set to expire for millions. To avert a government shutdown in April, Obama and congressional leaders reached a historic, last-minute deal  to slash about $38 billion in federal spending. Over the past week the president has taken a give-and-take posture with a recalcitrant Republican leadership opposed to tax hikes and big government. The GOP’s stance has been driven by the increasingly influential Tea Party caucus in the House.

Obama has rejected short-term solutions though. After clashing with House Majority Leader Eric Cantor (R-Virginia), who sought to to make a tactical delay with his proposal for an extension, the president maintained there was too much “positioning, posturing and catering” to lawmakers’ political bases. When he left Wednesday’s meeting, he said, “Enough is enough. ” He then gave lawmakers a Friday deadline to agree on a resolution.

The reality is that the talks have been mired in politics as the 2012 presidential contest heats up.  In a CNN interview, Massachusetts Gov. Deval Patrick says that “the Radical Right will let the economy fall off a cliff to stop President Obama.”

As this high-stakes drama continues to play out, we cannot afford to be oblivious to what this byzantine Beltway activity means for the nation’s economic health as well as our financial well-being. Here’s how we got here: Similar to your management of household finances, when the government spends more than it takes in that gap between spending and taxes represents  the budget deficit. Over the past decade, the size of the deficit has swelled due to several factors including significant revenue reduction related to the enactment of the original Bush tax cuts and last year’s extension; costs associated with the Iraq and Afghanistan wars; increased expenses for Medicare and Medicaid; and our government’s response to the Great Recession, which boosted stimulus spending and expanded safety-net programs like unemployment benefits.

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To cover the deficit, the U.S. Treasury borrows money by issuing securities. The treasury is authorized by Congress to engage in such actions but a limit is placed on the amount of debt the government can issue. That limit, known as the debt ceiling, has been raised repeatedly—in fact, since Ronald Reagan’s presidency it has been increased more than 30 times. Treasury officials estimate they will need additional borrowing capacity by August 2 but Geithner says the “true deadline is July 22,” enough time to draft legislation, make its way through Congress and onto the president’s desk for his signature.

Without a boost in the debt ceiling Treasury can’t borrow more money.  According to an analysis by the Bipartisan Policy Center, a Washington think tank, the federal government is expected to collect about $172 billion in revenue while being hit with roughly $307 billion in bills. That means the government would have funds to pay a bit more than 55% of such commitments.

If the U.S. sinks to deadbeat nation status, expect the following:

• Major credit rating agencies to downgrade U.S. debt, forcing bondholders that invest in highly-rated securities to sell their holdings.
• Once the default is resolved, the federal government would face an immediate hike in interest rates in order to borrow money. The ripple effect is that consumers like you would also have to contend with higher rates for mortgages, cars, student and credit loans.
• The erosion of investor confidence could collapse the market for U.S. Treasuries, considered one of the world’s safest assets. Administration officials say uncertainty in the bond market would foment additional financial chaos.
• Some analysts estimate that the market could plunge by roughly 9% in the three months after a default, heading into bear territory.
• Banks, still jittery from the Great Recession , would significantly reduce commercial financing, a development that would result in businesses failures and  job losses.
• If the US was forced to create a European-style austerity program, hundreds of thousands would be added to unemployment lines and, in turn, cripple an already fragile economic recovery.

To avoid default, Obama met with GOP congressional leaders for four straight days offering his “grand bargain” of spending cuts and tax increases to reduce the budget deficit by $4 trillion, putting such sacred cows as Medicare and Social Security on the table. House Speaker John Boehner (R-Ohio) appeared to seriously consider the proposal but the Republican leader couldn’t control the Tea Party caucus that refused to budge.

Senate Majority Leader Mitch McConnell (R-Kentucky) offered another proposal in which Obama could request increases up to $2.5 trillion in the government’s borrowing authority in three separate installments over the next year while simultaneously proposing spending cuts. McConnell’s power move: Allow for an increase in the debt ceiling and avoid the risk of default while putting the entire political onus on the president and Democratic lawmakers who support his requests. Conservatives once again rejected the plan, citing it would essentially diminish the GOP’s leverage to force deep cuts in the federal budget.

To break the stalemate, there has been speculation that the president may seek to employ a different power move, invoking his powers under the 14th Amendment to surpass the debt limit set by Congress. The 14th Amendment states that the national debt’s validity “shall not be questioned.”

So where does these political machinations leave the rest of us?  I don’t advise any of us to position ourselves on the sidelines. With a Black unemployment rate of 16.2%, the debt default scenario would be even more disastrous regarding the future job prospects and  financial standing of large numbers of African Americans as well as our nation as a whole. Cuts in government services will mean slashing of safety-net programs as well as reduction in public sector payrolls that employ legions of Blacks and other ethnic minorities. Even if the debt ceiling is raised, African Americans will still be negatively impacted by painful budget cuts.

We, too, can make a power move. There is strength in numbers and we must reignite our activism. Contact your congressional representative to push for a resolution to the debt crisis and to advocate policies that will advance our financial future. We must be aggressive in voicing concerns to both the White House and Congress so they can be held accountable. Social media also offers a powerful tool for sharing information and rallying troops to take action.

You must be part of the dialogue. Act now. Time is running out. Tick…tock…

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• BONUS DEPRECIATION:

Under prior law, a 50% bonus depreciation deduction was allowed for qualifying property. The provision has been extended to include property placed in service before Jan. 1, 2011. Additionally, certain property with long production periods and transportation property, including certain aircraft, qualify if placed in service before January 1, 2012. Bonus depreciation also applies to certain qualified leasehold improvements. The property must not be predominantly used outside the U.S. in order to qualify. The deduction is allowed in full for alternative minimum tax purposes. So if a taxpayer purchases and uses computers (five year property) in 2010 for $2,000,000, the 2010 depreciation deduction would be $400,000 without bonus depreciation. With the bonus, the 2010 deduction would increase to $1,200,000, or 60% of the cost of the property. Over half of the tax relief in the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 comes from this single provision.

• SECTION 179 EXPENSE ELECTION:

This section of the IRS code allows a business to deduct the cost of certain property instead of capitalizing and depreciating it. Under prior law, the amount of annual expense was limited to $250,000 and was reduced dollar for dollar for the amount of Code Section 179 property placed in service in excess of $800,000. The allowed expense amount and the investment limitation of $250,000 and $800,000, respectively, were scheduled to revert to prior levels of $25,000 and $200,000 in 2011. The Act, however, increases the allowed expense amount and the investment limitation to $500,000 and $2,000,000, respectively, for years beginning in 2010 and 2011. It also expands to include qualified leasehold improvements, qualified restaurant property, and qualified retail improvements. The expense election is calculated prior to, and in addition to, bonus depreciation. For example, the combined 2010 expense deduction, bonus deduction, and regular depreciation deduction amounts to 80% ($800,000) for a $1,000,000 eligible five-year asset placed in service in 2010.

• ENHANCED START-UP EXPENSE DEDUCTION:

For 2010 only, the deduction limit for qualified trade or business start-up expenses is increased from $5,000 to $10,000. The $10,000 deduction is reduced by the amount of total start-up costs that exceeds $60,000, so if startup expenses totaled $63,000, the deduction would be $7,000. Any costs not deducted are currently capitalized and amortized ratably over 180 months.

• SOCIAL SECURITY (FICA) TAXES:

For 2011 only, Social Security taxes are cutting by two percentage points the employee’s portion of the 6.2% tax to 4.2% up to $106,000.  This benefit also applies to the self-employed as well—reducing the Old-Age, Survivors, and Disability Insurance (OASDI) tax rate under the Self-Employment Contributions Act (SECA) tax by two percentage points to 10.4% for 2011 up to $106,000 plus the additional 2.9% Medicare tax (the 2010 retained rate) on their total self-employment income.

Be sure to read these related articles…

• New Study Shows 62 % Drop in Home Mortgage Approvals to Minorities
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• Your Get-out-of-Debt Checklist

Many Democrats maintain that the proposed cuts target programs for the most vulnerable Americans while Republicans counter that cutbacks aren’t deep enough. House Speaker John Boehner says Obama’s budget includes too much spending, borrowing and taxation and will result in discouraging job creation. Both sides, however, are dancing around the biggest national debt drivers—Medicare, Medicaid and Social Security. House Budget Committee Chairman Paul Ryan (R-Wisconsin) claims those big-ticket entitlement programs will be addressed in the GOP’s budget to be unveiled in April.

Obama’s proposed budget cuts include $100 billion from the Pell Grant program; $78 billion from defense expenditures; and $2.5 billion in energy assistance for the poor. It also calls for a $300 billion reduction of Community Development Block Grants for already cash-strapped municipalities. The plan would raise revenue by increasing the tax rate for married couples earning more than $250,000 per year and ending corporate tax breaks for oil, gas and coal companies.

Most deficit reduction recommendations from both the administration and Congress focus on non-security discretionary spending representing a small portion of the budget and will hurt large numbers of African Americans, maintains Margaret Simms, director of the Low Income Working Families project for The Urban Institute, a nonpartisan research group. She does believe, however, that Obama has tried to make strategic choices to revamp programs and make investments in education, infrastructure and clean energy.

Brace for impact (Image: Thinkstock)

“There will very likely be a negative effect on African Americans when the budget process is complete because reducing or restructuring some of these programs puts African Americans more at risk,” Simms said. “They’ve always been behind the curve in economic recovery and therefore some of the programs that are geared to helping those less fortunate are likely to be cut sooner than they should be as far as this population is concerned.”

When Obama and Republicans negotiated middle class tax cuts last year, Rep. Elijah Cummings (D-Maryland) predicted that the legislation would come back to haunt the president. Cummings asserts the compromise forced him to slash programs designed for the neediest Americans while the GOP points to his policies as evidence he’s a big spender. He further states that Republicans continue to acknowledge their contribution to the mammoth federal budget deficit.

“Now, what they’re also saying is that when they do their budget calculations, they’re going to continue that tax while Obama’s takes it away,” Cummings says. “Does it have a tremendous impact on African Americans? You betcha.”

Rep. Bobby Scott (D-Virginia) agrees. “When the bill passed, members of the [Congressional Black Caucus] asked how they would be paid for. Virtually everyone was focused on what they were going to get out of the bill without focusing on how you’re going to be paying for it,” he says. “Well now we’re seeing it. You’re going to be cutting community action agencies, Head Start, energy assistance for low-income seniors, education programs, safety-net programs, and investments in our future because of this monstrous tax cut bill that we passed last year.”

CBC chairman Emanuel Cleaver (D-Missouri) maintains that “Senator Obama would never approve President Obama’s budget proposal” and would openly criticize it. “So, we have an obligation to do that, to oppose things that we think will negatively impact our constituents,” says Cleaver. “While there’s a great deal of talk about proportional cuts, it feels like the poor are taking a much heavier hit than the middle and upper classes.”

Despite his objections, Cleaver believes that the economic conditions the president inherited placed him in politically dicey situation. “He’s also engaged in a chess game with the Republicans. What we’re seeking now is, ‘I’ve made my move and now I’m waiting on yours,’ ” he adds. “I’m not sure the president’s heart is really in some of the cuts.”

That may be true but Robert Smith, a political scientist at San Francisco State University, says Obama’s mind is on the 2012 campaign.“It’s all about next year’s election and I think his budget, State of the Union speech and virtually everything he does in domestic policy from now on is about positioning himself for the election,” Smith asserts. “He can argue that he made the responsible, tough cuts and the Republicans are being irresponsible by trying to go further.”

Criticisms from the left and the right work to Obama’s advantage because it places him in the center, making him more appealing to independent voters that abandoned Democrats during last year’s mid-term elections. Smith says black lawmakers on Capitol Hill understand the political dynamics and realize their criticisms won’t hurt the president politically.

“They’re obligated and can’t not criticize the cuts he’s proposing because they directly affect their constituents,” Smith says. “I think it’s a great game because they won’t hurt Obama among their and his constituents and in a way, it might help them. It’s win-win for both sides.”

For more news and politics, be sure to read:

• In the News: America gets  the hookup
• Why Black America no longer exists
• Michelle Obama shows up on Regis & Kelly to fight obesity

Beyond Ella’s new counting skill, though, it’ll be my job to teach her to appreciate the true value of a dollar. At some point, I’ll need to break it to her (gently) that saving money—and maximizing those dollars via prudent investing—is the only way to guarantee a comfortable future.

Increasingly, we must all fend for ourselves when it comes to living comfortably in our golden years. In 2008 and 2009, people nearing retirement who treated their investment portfolios like toaster ovens they could “set and forget” got burned. Between early 2008 and March 2009, workers ages 55 to 64 lost roughly a quarter of their 401(k) savings, according to the Employee Benefit Research Institute. Some of those losses were preventable. Nearly a third of older 401(k) participants had 70% to 90% of their portfolios tied up in equities, which was inappropriately risk-ridden considering their proximity to retirement.

Building a nest egg takes active involvement. Just a few generations ago, this wasn’t the case. Before the tax law that created the 401(k) went into effect in 1980, employers offered “defined-benefit” pensions that guaranteed workers a monthly benefit check, determined by salary and years of service, upon retirement. My grandfather’s pension from the U.S. Postal Service was a boon to my own family. For at least two decades after his death in 1959, his pension checks arrived regularly in my grandmother’s mailbox each month. What made the old pension plans attractive was that employers were responsible for managing the fund’s assets, and enrollment was automatic.

Future generations won’t have that luxury. In the private sector, defined-benefit plans are dying out. And even the U.S. Postal Service is struggling to meet some of its pension obligations. Americans who don’t have a pension can hardly rely on the Social Security system: In mid-2009, White House economists reported that the Social Security Trust Fund is likely to run out by 2037.

Managing money requires constant self-education. In truth, I’m learning, too—which is why my job as a personal finance editor at black enterprise is endlessly fascinating. On a daily basis, I’m gathering new information that I can apply to my own life, and share with readers, friends, and family. In some ways, today’s popular retirement plans offer freedom. But being in control of our own assets is also a big responsibility. It’s heartening to think that 40 years from now media outlets such as black enterprise will continue to offer my daughter and her peers guidance in this do-it-yourself world of wealth building.

John Simons is editorial director of personal finance for Black Enterprise.

Now you see them, then you won't: Social Security checks will soon disappear.

If you’re looking for your unemployment or social security check, don’t bother waiting by the mailbox. Your check won’t be in there. That’s because the government will now pay consumers electronically via direct deposit instead of paper check for all benefits payments.

The changes, which are expected to begin next March, have come about in an attempt by the Department of the Treasury to eliminate wasteful practices, save money, and modernize government. The Department of the Treasury estimates that it will save $300 million during the first five years and more than $120 million each year after that.

While government payments such as unemployment and social security will be sent electronically to your bank account, this new system will not apply to payments from the IRS. If you don’t have a bank account or you don’t want direct deposit, you still have options. You’ll be able to receive payments through the Treasury Department’s Direct Express debit card.

For more information, visit the Office of Management and Budget Website.

Sheiresa Ngo is the consumer affairs editor at Black Enterprise.

CBC Members Say Jobs Bill Doesn’t Go Far Enough

The news that February’s unemployment rate held steady at 9.7% and that the jobless rate for African Americans fell to 15.8% from16.5% brings little comfort to Congressional Black Caucus members, many of whom represent districts with unemployment rates as high as 17%. Twenty-one black lawmakers expressed their frustration on Thursday by voting against the jobs bill that the House passed with a vote of 217 to 201.

The centerpiece of the legislation is a 6.2% payroll tax exemption for businesses that hire new workers and a $1,000 tax credit if the workers stay on for at least a year. The bill also extends the Highway Trust Fund and the Build America Bonds program. Because it was modified to comply with the pay-as-you-go budgetary rule to mollify Blue Dog Democrats, the bill must go back to the Senate for another vote.

According to Democratic leadership, the bill is the first step in an overall job creation strategy. But Rep. William Lacy Clay and several other caucus members dismissed the piecemeal effort.

“I don’t know how you go back [home] and explain that you gave $15 billion mostly to businesses in the hope that they would create jobs while you’re robbing the Social Security trust fund,” said Clay. “I have no desire to participate in that game.”

The CBC had lobbied for the inclusion a large summer youth program; federal dollars for living wage jobs at government and nonprofit agencies; and a concentration of spending in areas where unemployment is the highest.
What they got was a provision that 10% minority contracting goal for transportation projects, which one Democratic aide said is merely a restatement of current law that isn’t even enforced now.

“We continue to have our issues deferred and we end up seeing the Blue Dogs get their way over and over again,” said a visibly disappointed Rep. Emmanuel Cleaver, who co-chairs a CBC jobs taskforce. “It’s almost as if people, the Senate in particular, are saying ‘CBC members will go along with us—they always do’.”

SBA Proposes Rule to Expand Contracting Opportunities for Women

The Small Business Administration announced this week a 60-day comment period on a proposed rule to expand federal contracting opportunities for women-owned small businesses. The agency has identified 83 industries in which women-owned small businesses are “underrepresented or substantially underrepresented.” The proposed rule would allow federal procurement officers to set aside contracts in those industries that do not exceed $3 million, or in the case of manufacturing, $5 million.

“Across the country, women are leading strong, innovative companies, and we know that securing federal contracts can be the opportunity that helps them take their businesses to the next level,” said SBA chief Karen Mills in a release announcing the proposed rule.

The federal government currently has 5% women-owned small business contracting goal. To be eligible for set asides under the proposed rule, a business must be 51% owned and controlled by one or more women who are U.S. citizens and be deemed “economically disadvantaged.” The rule also eliminates a requirement that each federal agency certify that it had discriminated against women-owned small businesses in order to participate in the set-aside program.

“For too long, women-owned businesses, in particular minority women-owned businesses, have faced challenges in attempting to do business with the federal government. This proposed rule demonstrates that the Small Business Administration recognizes this,” said Rep. Yvette Clarke (D-New York), a member of the Congressional Black Caucus and the House Small Business Committee . “Democracy is not a spectator sport. That is why I encourage all American citizens, especially women business owners, to take full advantage of the 60 day public comment period to weigh in on the proposed rule.”

Comments may be submitted online at www.regulations.gov up until the close of business on May 3.Black Groups Join to Increase African American Census Responses

Over the next 30 days,  Unity Diaspora Coalition, whose partners include the NAACP, the Black Leadership Forum, the Leadership Conference on Human and Civil Rights, and other major black groups, will work with grassroots organizations across the nation to organize Census Sundays, town hall meetings, and other events to remind people to return their 2010 census forms.

People in hard to reach communities often neglect doing so for a variety of reasons, from distrust of government to downright laziness. But it comes at a cost because when they are not counted much-needed resources are diverted elsewhere.

“The effect of the undercount is particularly bad on the African American population because it really does effect how [legislative] districts are drawn and can be used to shrink African American districts and power,” said Barbara Arnwine, executive director of the Lawyers’ Committee for Civil Rights Under Law. By contrast, she added, when there is an accurate count, black communities can maintain or even make political gains.

Paraphrasing the late Rep. Shirley Chisholm, National Council of Negro Women chair and president emerita Dorothy Height said, “If you’re not in the count, you’ve counted yourself out.”

“It’s time to hold our own community accountable,” said Melanie Campbell, who heads the National Coalition on Black Civic Participation. “People keep looking for change, but we’re the change.”

The census events also will be used to get out the vote for the November mid-term elections.

However, if you’ve been receiving Social Security benefits, pension payments, or distributions from retirement accounts, a return to the workforce could cause a complicated tax situation. To prevent any unwelcome surprises, ask yourself these questions before accepting a new job:

How much more will I pay in taxes?

“One of the biggest issues retirees have when they return to work is an unexpected increase in taxes. Sometimes the additional income pushes them into a higher tax bracket, and they weren’t anticipating it,” says Steven Sanders, chairman and CEO of First Genesis Financial Group, a financial advisory firm in Newtown Square, Pennsylvania.

How will a new job affect my Social Security benefits?

It’s fine to have a job while you’re receiving retirement or survivor benefits. The extra income would be averaged into your total earnings history, so you could actually receive a higher Social Security benefit in the future.

At the same time, if you’re receiving payments, but you’re not at full retirement age, some of your benefit amount could be reduced based on your income. To find out more information, visit the Social Security Administration’s Website or call 1-800-772-1213.

How is my IRA affected?

You can receive distributions from your Roth IRA or Traditional IRA if you meet the conditions (see IRS.gov for details). However, you might choose to wait before receiving all of your allowed payouts. “Many clients are taking only the minimum required distribution from their IRAs so they can let the money in their IRAs last longer,” Sanders says.

While this may be a prudent choice, keep in mind that individuals will have to start taking mandatory distributions from traditional IRAs at age 70 ½. The withdrawals, which can be significant if there haven’t been any distributions up to that point, are taxed as ordinary income. “Those mandatory distributions could put an individual at the highest tax bracket for the rest of their lives,” says Gary Oliver, a partner with Fortius Financial Advisors in Salt Lake City, Utah. He suggests focusing on retirement planning in advance to try to reduce that tax burden.

Are there any waiting periods for health insurance?

One major reason retirees return to work is to access health insurance. Ask your potential employer if there’s a waiting period before you can receive this valuable benefit. “Many people want to go back to work to increase their cash flow, but that cash flow could be automatically improved if they didn’t have to wait to pay for (individual) health insurance,” Sanders says.

When can I retire again?

You may choose to continue working because you enjoy it, but you should still save for retirement. “You don’t want to be forced to keep working and never retire,” Oliver says.  Don’t let a job be your only retirement strategy!

What else should I know?

Everyone’s individual situation is different, so contact an experienced financial advisor to answer your specific money, tax, and retirement questions.

Once you’ve done your planning, you can head back to work with confidence. “When a retiree re-enters the workforce, employers benefit by having the wisdom and experience those seasoned citizens have, and the employee has a place where they can receive additional cash flow and maybe enjoy reduced health care insurance costs,” says Sanders.  It’s a true win-win for everyone.

But you don’t have to wait until the “normal” retirement age to stop fighting rush-hour traffic. You can quit work and start to collect Social Security retirement benefits at age 62. But if you start then, or any time before the normal age, your monthly checks will be smaller.

Many people want to retire before age 62–even as early as age 55. If you’re among them, more than likely you’ll need to tap a retirement account such as your IRA or 401(k) to cover your living expenses.

The catch? “If you draw down your retirement account before age 59-1/2, you may owe a 10% penalty,” says Mark Cortazzo, senior partner at MACRO Consulting Group, a financial planning firm in Parsippany, New Jersey. Say you pull $20,000 from your IRA when you’re 57. Not only will you owe income tax on that $20,000, you’ll owe a $2,000 surtax (10% of $20,000) as well.

There isn’t anything you can do about paying income tax if the money in your IRA or 401(k) has never been taxed. But there are a couple of ways to dodge the 10% penalty.

For starters:

1. Stay on the job until age 55. “The tax code provides penalty-free access to the money in your company’s retirement plan as early as the year you reach age 55 in case of ‘separation from service’ that year or later,” says Natalie Choate, an attorney with Nutter McClennen & Fish in Boston. Therefore, if you

retire at age 55 or later and leave your money in your former employer’s 401(k) plan, you can take withdrawals and escape the 10% surtax.

2. Take “substantially equal periodic payments.” The age-55 exception won’t help everybody. Your company may not allow former employees to stay in its 401(k) and take withdrawals. Even if it does, you may not want to keep your money there, limited as it would be to the plan’s investment choices.

What’s more, this exception applies only to money at the company you left at or after age 55. “Money you might have in IRAs or other company plans won’t qualify,” says Choate, author of Life and Death Planning for Retirement Benefits (Ataxplan Publications; $89.95). Perhaps most important, this exception won’t help if you want to retire before age 55.

At any age, as long as you’re retired, you can avoid the 10% surtax on any or all of your retirement accounts with a “series of substantially equal periodic payments,” according to Choate, or what she calls SOSEPP. In essence, you take an annuity based on your life expectancy. If you start the withdrawals at age 48, for example, you would use your official 36-year life expectancy to calculate how much you can take
out, penalty-free.

Five years or 59-1/2. Suppose, for example, John Smith retires at age 48 and wants to tap his IRA without paying a penalty. He does not have to start by taking out 1/36 of his account in year one and gradually draw down the entire account over 36 years. Instead, he can keep up his SOSEPP for five years or until age 59 1/2,
whichever comes later.

John starts his withdrawals at age 48, so he must continue until 59-1/2. If Tracy James starts at age 56, she must continue until at least age 61. Once you’re past both the five-year and age-59-1/2 hurdles, you can take out as much or as little as you’d like, without paying a penalty.

More or less. The SEPP rules permit you to decide among various methods, which result in different distribution amounts.

Minimum distribution amounts. You may want to take a relatively small amount from your IRA or 401(k), leaving as much as possible in the account to support a long retirement. In that case, you might take 1/36 of the account in year one, if you have a 36-year life expectancy, about 1/35 of the account in year two, etc.

Maximum distribution amounts. The Internal Revenue Service permits you to use an “amortization” method instead. In essence, you project how large your retirement account will grow over the years and take your SOSEPP based on that projected appreciation. Depending on your age and on the level of interest rates in effect at the time you start a SOSEPP, you might be able to take two or even three times as much from your retirement account, penalty-free, as you could with the minimum distribution method. (The IRS also permits an “annuitization” method, but it’s seldom used.)

Using recent interest rates, for example, a 50-year-old using the minimum distribution method would be able to withdraw nearly $11,000 a year from a $500,000 IRA, without owing a 10% penalty. With amortization, he could take out $23,000 or so, penalty-free.

Your accountant or financial adviser should be able to walk you through the calculations so you can choose the appropriate method for SOSEPP withdrawals. Be careful, though.

“Contributing just $1 to an account that has begun these distributions could trigger retroactive penalties plus interest,” says Cortazzo. Withdrawing more or less than the permitted amount can also trigger penalties. Therefore, you should be confident that you’ll maintain your SOSEPP precisely until you pass both five years and age 59-1/2.