The Small Business Angle, Part II

The Boston Globe discovers the fine print

One of the best stories I’ve seen in the post-health reform media era comes from the Boston Globe. Health reporter Kay Lazar held a microscope to the much-touted small business tax credit and found a lot of little loopholes that cast doubt on the usefulness of the credit for many small firms in the Bay State. This is important, since, as Campaign Desk has pointed out, the little guys up there are suffering. They’ve experienced double digit rate increases and arguably got the short end of the stick in the state’s health reform law.

Lazar’s story was short but comprehensive, and shows what good reporters can do—even in a tight space—if they know what they are looking for. Through the eyes of the Capobianco family, which owns an automotive shop in Hyde Park, she told readers how the family eagerly anticipated the new tax credit because, as Marcia Capobianco, the firm’s bookkeeper, put it, “I have been going frantic trying to figure out what I am going to do about health insurance.”

She soon discovered the government’s escape hatch, which, of course, limits what it will spend on subsidies. The law says that family-owned businesses cannot count employees who are family members in determining the credit. That means the automotive firm with four workers has only one who is not a family member. The bottom line: the $3,800 annual credit they were expecting now amounts to less than $1,000. “I guess we’re just peons,” Capobianco told the Globe.

Lazar did some digging. She called the Treasury Department in Washington and found that family members are generally excluded from business tax credit programs to “ensure fairness with respect to nonrelated taxpayers… to protect the integrity of the system and prevent abuse.” Abuse? Integrity? Why, neither the president nor the pols talked about abuse when this provision was being crafted. Their message was about helping the little guy.

Lazar also discovered that the White House was less than forthcoming about the limitations of the credit that it has been promoting to win support from small businesses. “Information on the exemption can be hard to find,” she reported. It was not included in a White House “Fact Sheet” released April 1 soon after the bill was signed; on an IRS “Frequently Asked Questions” bulletin, the problem is addressed as answer number fourteen in a twenty-two-item release. The bulletin reveals that family members of a business owner or the owner’s partner are not considered employees for purposes of obtaining the credit.

Even Jon Hurst, president of the Retailers Association of Massachusetts, did not know about the family exemption. Hurst represents the state’s small businesses, but apparently the government’s PR initiatives didn’t include informing such folks.

Lazar also interviewed a Massachusetts business consultant, who advises many small firms. He told her that the administration had used examples showing how the formula for calculating the credit would work, but that calculation did not mention the exclusion of family members.

As the administration begins its sales pitch today, pushing the parts of the law that are most favorable to its political strategy, it would be good for the press to follow Lazar’s example, and that of Eric Whitney at Colorado Public Radio. As both have shown, the loopholes don’t always get mentioned, and there will always be Americans left out of the “glass half empty, glass half full” health reform concocted by Congress. Journalists need to tell the whole story. It’s fair to say that the pols will not.

Has America ever needed a media watchdog more than now? Help us by joining CJR today.

Trudy Lieberman is a longtime contributing editor to the Columbia Journalism Review. She is the lead writer for The Second Opinion, CJR's healthcare desk, which is part of our United States Project on the coverage of politics and policy. She also blogs for Health News Review. Follow her on Twitter @Trudy_Lieberman.