Tuesday, October 5, 2010

Middle-class consultant, worthy of a tax break

Eric Marburger is one of my croquet buddies, a part-time human resources expert working with the Mountain States Employers Council, and an entrepreneur HR consultant with private clients.

Marburger started his business, ESM Consulting Services, twelve years ago to supplement his and his wife Helen's income after the couple arrived in Colorado in 1998.

It was a good gig. Helen's position came with medical-insurance benefits, so Eric's tiny business and the Mountain States part-time work gave him the schedule flexibility he wanted in his work life. Together the couple made a good middle-class living.

"I don't want to work 60 hours a week," Marburger told me. Or "try to make as much money as possible."

Then came the Great Recession. Helen lost her job in February, but the couple continued their health-insurance through COBRA, the safety net that allows you to keep coverage provided by your employer's health plan as long as you can pay the full premium for the insurance.

As a human-resources expert for hire, Eric has had to know the ins and outs of health-insurance coverage, employee compensation, employee retention and terminations, other benefits and the whole range of HR chores within a company. His specific expertise is compensation, and you can tell he knows the subject well when he discusses problems employers regularly encounter in a down economy:

"There's only so much money organizations have for their employees," he said. "I tend to work with firms and organizations where personnel services might be 80- to 85 percent of the total expenditures for the company. Well, if health insurance is going up, let's say 12 percent, which is probably what it's averaged over the last few years, there's not a lot of money left over for pay increases or for any other additional benefits that might be wanted by the employees or even by the management of the company."

In other words, Eric Marburger knows the crossroads of operating a business profitably where rising health-insurance costs, declining sales, employee demands amid reduced numbers of workers (layoffs), and government regulation pull a business owner in multiple directions. As a sole-proprietor of his own consulting service, Marburger also makes a good example of a businessman dealing with all the push-and-pull that 21st century business entails nowadays. And this is a man who doesn't want to work 60 hours a week.

But Eric has been busy lately. We don't see him on the croquet court as often as we once did. His part-time work as a business consultant for Mountain States (about 20 hours a week or more) and the revenue he generates from his small consulting business (about $30,000 a year) is far more important to his family income now than it was before the recession. And like any good entrepreneur he is broadening the spectrum of services he can offer a client.

"I've tried to diversify my areas of expertise a little bit," he said, "just kind of make myself a little more valuable generally."

Making himself more valuable to the family, as well. For example, with Helen's layoff after 12 years at her employer, Marburger knew his family could qualify for a reduced health-insurance premium through a subsidy created by the economic stimulus package passed by Congress in 2009.

"We're paying $460 a month for probably a $1,400 insurance plan," he said, but the subsidy runs out next spring, as does his wife's COBRA coverage, so the couple is going to have to figure out a way to pick up new health insurance on their own, perhaps with a new insurer.

That's why learning the changes businesses face with the onset of national health-care reform becomes a large part of Eric's effort to make himself more valuable. He can help himself, his clients and his family all at the same time. And maybe even make more money.

Nevertheless, Marburger never expects to be one of those small-business owners with family incomes above $250,000 who might be taxed more heavily if Bush-era tax cuts for the wealthy are allowed to expire in December. Republicans and some Democrats (I betcha they're the wealthy ones!) want to renew the tax cuts for the rich, but the Obama administration wants to limit the renewals to the middle classs.

President Obama's opponents on the issue argue that small-business owners who pay taxes on their profits through their personal income-tax filing will bear the brunt of the increased taxes on the wealthy, and, therefore, limit their ability to hire new workers at their small businesses.

To be quite frank, and since I'm a blogger and can use more colorful language than I could in a newspaper or a magazine, that argument is pure bullshit.

Small-business owners who include business profits on their personal-income tax forms are more often sole-proprietors like Eric Marburger, and they fall far short of the $250,000 income level that would be subject to restored higher taxes.

Marburger is a compensation expert. He agrees with me that the small-business owner who makes enough money to be be placed in the $250,000-or-higher tax bracket is a rare bird, indeed.

"I've certainly worked with folks that earn $250,000, but they're not small-business owners," Marburger told me. "They're executives of larger organizations. I've worked with a lot of health-care companies, hospitals and corporations, ... [and] the executives are the ones earning over $250,000 a year. I don't know that I've worked with any small-business owners that would fall into that category."

He also said his own income from private clients for the past few years amounts to about 30 percent of his annual take-home pay, which falls far below the $250,000 level. "Not even close," Eric said and laughs. "Not even close."

While I was a full-time business reporter and writer, I avoided doing profiles of business consultants because I considered them less than substantive parts of Colorado's economy. Self-employed contractors who don't employ others usually have little influence on the economy and, therefore, are often ignored by business journalists.

Now that I'm a self-employed journalist and wannabe consultant, I have a different perspective.

It's still true that small businesses with employees are the job-creators national, state and local governments are trying to stimulate nowadays to hurry up the nation's economic recovery.

But it is also true that the self-employed contractor -- a carpenter, electrician, even a business consultant -- is among those who suffer the effects of a business downturn, much like the unemployed who get laid off from small companies and larger ones as well.

The self-employed also add to the recovery when they get work as an economy improves. As Obama says over and over, we're all in this together. The rich people who made money during most of the Bush era leading up to the nation's latest economic downturn may have to give back a little of it to put a bunch of middle-class business consultants, construction workers and professionals back on the job.

Furthermore, if you've been making $250,000 a year through the downturn, it seems like a small price to pay for the privilege.

1 comment:

  1. As a single person sole proprietor i think your article is right on. Thanks for posting.