Among the very worst practices of American broadcast news is the "focus group of one." That is, reporters casually substitute the tale of a single person, company or community for actual analysis of a complex issue. And so it was Sunday, when CBS Evening News profiled Rod Hudson of Quicksilver Analytics to warn that small businesses face a potential triple whammy from the so-called "fiscal cliff." As it turns out, Hudson's firm isn't just wildly unrepresentative of the nation's six million small businesses, but is exempted from some of the federal provisions he protests.
Of course, you'd never know that listening CBS correspondent Randall Pinkston. In his segment titled "'Fiscal cliff' means uncertainty for small business," Pinkston offers this ominous introduction:
"But now with the post-election budget fight in Washington over the fiscal cliff, Hudson's business faces a battle on three fronts, all of which are up in the air: defense cuts, tax hikes and health care costs."As it turns out, not so much. Starting with health care, Hudson's business faces no battle at all.
Quicksilver Analytics is a 13-person company which produces biohazard and weapons of mass destruction testing kits for the United States military, Coast Guard, research labs and other security-related agencies. According to the CBS report, Hudson is very worried about the impact on his business of the Affordable Care Act:
"I believe in families and supporting the employees. But again, it's a big unknown. We've looked at whether it just might be beneficial to cancel insurance pay the penalties."But under the Affordable Care Act, for businesses with fewer than 50 employees there are no penalties for failing to provide health insurance to workers. Not only are 5.8 million of the nation's 6 million small businesses exempt from the insurance mandate, but the ACA includes attractive tax credits to encourage companies like Hudson's to provide coverage. As the Washington Post recently explained:
If you decided to provide health insurance for your workers, you could be eligible for a tax credit. The credit is available to small businesses that have fewer than 25 full-time-equivalent employees with average wages of less than $50,000 a year. (Two half-time workers generally equal one full-time worker.)Those incentives may explain why, less than a year after passage of the ACA, both private insurers and small business owners alike were already reporting a jump in companies adding coverage for their employees.
If you covered at least half of the cost of single coverage for your employees, you might be eligible for a tax credit of up to 35 percent of the amount. Starting Jan. 1, 2014, the maximum credit increases to 50 percent.
Then there is the matter of taxes. President Obama has proposed no new tax cuts for households earning over $250,000 a year. For families and those small businesses filing as individuals, that means the top income tax rate would return to its pre-Bush level of 39.6 percent. (Capitals gains would be taxed at 20 and not 15 percent.) And as CBS' Pinkston claimed, that's a problem for Mr. Hudson:
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PINKSTON: Hudson is also concerned about taxes. Because his profits are treated as income, that puts him over $250,000 a year, the level where President Obama wants taxes to go up.Whether or not that would come to pass, it is undeniable that very few small businesses are the same boat with Rod Hudson. After all, the nonpartisan Tax Policy Center has concluded that only about three percent of all small business filers would be hit by the expiration of the upper-income Bush tax cuts. As Howard Gleckman explained in August:
HUDSON: I'm supposedly a rich guy? I don't think so. I think we ought to pay our share, but that may have a significant impact to the point where I have to lay off one or two more people.
Most small businesses report their income on individual tax returns, either on Schedule C (for self-employment or sole proprietorships), Schedule E (for S corporations) or schedule F (for farms). We don't know how many of these businesses are really small, but next year about 36 million taxpayers will report income from these sources on their 1040s. Only about 900,000, or 2.5 percent, would pay higher rates if the Bush tax cuts were allowed to expire for those in the top brackets.Regardless, Mr. Hudson is well acquainted with the modestly higher Clinton-era tax rates on income and capital gains. After all, Quicksilver has been in business since 1994.
When it comes to the $500 billion in possible cuts to defense spending now mandated by the 2011 sequestration bill, Quicksilver Analytics may well see an adverse impact. But even with sequestration, the Pentagon's spending will remain at roughly 2007 levels through 2020. (President Obama's proposed budget would make 2013 the status quo.) And as Quicksilver's Hudson is doubtless well aware, DoD's spending has almost doubled since fiscal year 2001, including a jump of over two-thirds when the wars in Afghanistan and Iraq are excluded:
(The numbers above don't include spending from other departments, like Homeland Security, Transportation and Energy, which are actual or potential purchasers of Quicksilver's products.)
Rod Hudson has over 30 years of experience in WMD detection efforts, including over 21 years of service to the United States as an Army Chemical Corps Officer. His unique background also allows Quicksilver Analytics to qualify as a Service-Disabled Veteran-Owned Business (SDVOB). In keeping with President Bush's executive order from 2004, that makes Quicksilver Associates eligible to bid on federal contracts through set-aside programs like this one in 2010:
Quicksilver Analytics, Inc. announced today that they have been awarded a contract by the U.S. Army Research, Development and Engineering Command (RDECOM). Quicksilver was selected as a Prime Contractor for the Small Business set-aside category of a $485 million, five year Indefinite Delivery, Indefinite Quantity (IDIQ) contract in which they will provide CBRNE (Chemical, Biological, Radiological, Nuclear, and Explosive) support services to the Edgewood Chemical and Biological Center (ECBC) and other defense agencies.All of which makes Hudson's company a glaring exception to the rule of the supposed "fiscal cliff" impact on America's small businesses. And by relying on Quicksilver Analytics for his focus group of one, Randall Pinkston did CBS viewers—and the American people—a great disservice.