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View Diary: CBS misleads small businesses about the 'fiscal cliff' (11 comments)

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  •  Trying to understand small business in the US by (3+ / 0-)
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    Jon Perr, kurt, cassandracarolina

    looking at one business is not helpful, so the CBS story does not do anything for me.

    Just to illustrate the importance of looking at employees in small business Vs number of firms look at BLS (U.S. Bureau of Labor Statistics ) data at

    In particular what fraction of employees of small business work for businesses in the top 2% largest (by employment).  In BLS terminology, and in the Federal government, the term "small business" generally means fewer than 500 employees.

    Table F. Distribution of private sector employment by firm size class, not seasonally adj

    Table G. Distribution of private sector firms by size class, not seasonally adjusted

    From the percentage data for 2012 (normalizing for firms less than 500 employees) we can see that the two largest small business classes (employees 100 to 249, and 250 to 499 ) comprise 1.98% of small businesses.  

    The number of employees for 2012 in the largest 1.98% of small business firms is 18,943,000 which represents 32.30% of employees in small business.

    Firms with 1-4 employees represented 55.48% of firms but only 9.40% of employee in small business.  So the median size firm is less than 4 by number of employees.  In contract the median size firm weighted by employee size is close to 49 - ten times the unweighted size.

    In the discussion of small business on the issue of business and personal income taxes, the definition of small business for policy makers changes -- in many cases what they really mean is the firm is organized as a pass through entity.  

    For example, this website is owned by Kos Media, LLC which is a pass though entity - which means it is organized so it does not pay Federal Income taxes, put the profits or losses are recognized by the owners on their personal tax return in proportion to their ownership.

    TV news rarely allow the time for a story to actually inform viewers for an issue as complex as tax, healthcare and the economy.  They even do a poor job of explaining the unemployment reports.

    The most important way to protect the environment is not to have more than one child.

    by nextstep on Mon Dec 10, 2012 at 06:12:51 PM PST

    [ Parent ]

    •  Thanks! And I Think We Agree (5+ / 0-)

      ...the CBS story did a disservice to viewers for the reasons you and I each cited.

      The BLS numbers you provided give helpful context.  Typically, what has happened is that:

      1. Obama/Democrats say we should let the Bush tax cuts expire for those earning over $200,000 ($250,000) for families.  

      2.  Obama/Democrats go out to say that only about 2% of households would be impacted by that change.

      3.  Republicans point out that the new rates hurt what they (not the BLS) call "small business owners" who their personal taxes for their businesses.

      4.  People like me (and the Tax Policy Center) point out of that the 36 million "small businesses" like that include doctors, lawyers, Presidents, partnerships and S corporations like Bechtel.  Of these sole proprietorships and "small businesses" (some of which actually have thousands of employees - not "small" by anyone's definition.)  And only about 3% will pay higher taxes.

      5.  You're right that that statistic doesn't capture the impact of that 3% on total share of revenue and workforce.

      Unfortunately, Randall Pinkston didn't raise any of this.

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