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Fact-Check: At Most, 2% of Small Businesses Would Pay More Taxes Under Obama's Plan

By Jeralyn, Section Elections 2008
Posted on Thu Oct 16, 2008 at 08:31:43 PM EST
Tags: John McCain, Barack Obama (all tags)
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CNN's Money fact-checks McCain's claims about Obama's tax plan and small businesses. Shorter version: McCain's wrong again.

The bottom line: McCain's claim only works by using an overly broad definition of what counts as a "small business" - and even with that definition, fewer than 2% of business owners would be hit by Obama's proposed rate increase. For those who are affected, the increase would be levied only on a part of their earnings, not all of them.

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    Fact-Check: At Most, 2% of Small Businesses Would Pay More Taxes Under Obama's Plan | 53 comments (53 topical)

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    Obama uses the same overly broad definition (5.00 / 1) (#2)
    by ruffian on Thu Oct 16, 2008 at 09:23:06 PM EST
    when he says that 95% of all small businesses makes less than 250k. But it should be a good point to hammer home that only 2% of business owners would be hit with the tax increase.

    Better still is to explain the rationale behind tax increases better then 'spreading the wealth around'.  How about decreasing the deficit, paying for infrastructure, paying for the war, not borrowing from China, etc?

    The author's definition of (5.00 / 1) (#6)
    by Pepe on Thu Oct 16, 2008 at 09:50:59 PM EST
    what is a business is bogus. He says authors and consultants, or free lancers are not businesses which is laughable. Tell my close acquaintance Mark Victor Hansen who writes the Chicken Soup series of books that his is not a business. Tell that to Steven King. Tell that to the free lance writers in Hollywood or Nashville. Tell that to financial consultants or Insurance salesmen that they don't run a business. Tell that to corporate consultants who consult on management, computers marketing and on and on. Tell Martin Scorsese that the way he makes his livelihood is not his business.

    The bottom line here is the article is one mans opinion who has an ax to grind.

    A business by definition is a commercial activity engaged in as a means of livelihood. That covers a lot of people who have had to go out on their own when their jobs are lost to India or elsewhere or they have been downsized out of a job or they just figured out that their talents pay better when they go out on their own.

    A lot of bloggers make a living blogging and that is all they do is blog. According to the author digital publishing whose income is funded by advertisements is not a business! Pardon me for laughing.

    The author is way out of bounds with his slant on what constitutes a business.

    Parent

    As one who has done consulting (5.00 / 1) (#9)
    by Cream City on Thu Oct 16, 2008 at 10:02:13 PM EST
    and dealt with the IRS on it, the IRS agrees with you.

    Parent
    Yes. (none / 0) (#42)
    by andrys on Fri Oct 17, 2008 at 05:13:55 AM EST
    As someone who's done the same, I wish I could have made $250,000 in a year  :-)

      By the way, I think someone said that it's a Net of $250,000.

    Parent

    Well (5.00 / 3) (#12)
    by Steve M on Thu Oct 16, 2008 at 10:05:16 PM EST
    I think very few people think of a freelancer with no employees when they hear the words "small business."  And it's kind of hard to argue that small business are engines of job creation if you use a definition under which the vast majority of "small businesses" have no employees.

    The entire reason the GOP brings up small businesses in this context is to argue that Obama's proposed tax increase affects more than just well-off individuals who make more than $250,000 a year.  That argument looks pretty hollow if the definition of "small businesses" actually includes millions of those same individuals.

    If you want to call Stephen King a small business, you can call him that, but you'll have to explain to me why that would be relevant to a discussion of whether we should raise his taxes.  Including individuals in the definition of "small businesses" just makes the entire concept seem like a word game.

    Parent

    Well if you think (5.00 / 1) (#16)
    by Pepe on Thu Oct 16, 2008 at 10:33:48 PM EST
    that the individuals and categories of people I mentioned do not or never have employees or provide opportunities for other individuals to make a living then you would be right. The fact is that many of them are every bit as much small enterprises just as a  person with a brick and motor location is with employees or other independents. I was a consultant for 5 years but needed employees to do the same things that an Accenture for instance does but of course on a micro-micro-scale in comparison.

    The point here is in politics anyone who writes for a news agency or even a blogger can create their own definitions to suit their argument. And you can't lump all authors or freelancers, etc as all operating in the same manner for your own convenience sake. Many do employ people as I did. As Mark Victor Hansen does.

    Parent

    I find it kinda funny (5.00 / 2) (#17)
    by Steve M on Thu Oct 16, 2008 at 10:39:40 PM EST
    that you went on a long rant about the fact that the author outrageously used the definition of "small business" that is used by the Small Business Administration.  If Mark Victor Hansen employs people other than himself, then he fits the definition used by the Small Business Administration and he is counted as one of the 6 million.

    Look, if you want to call me a job creator because I help keep the grocery store in business by spending my paycheck there, go nuts.  Say it loud, maybe someone will cut my taxes.  But if you want to argue that it's bad public policy to raise the taxes of individuals who have no employees simply because they somehow indirectly "provide opportunities for other people to earn a living" then I have to wonder if you're simply opposed to the existence of any taxes at all.  Any time you tax economic activity, someone somewhere is discouraged from doing something, but we still need revenue to run a country.

    Parent

    I never mentioned the SBA (none / 0) (#24)
    by Pepe on Thu Oct 16, 2008 at 10:58:31 PM EST
    in either of my posts. I was talking about what constitutes a business. Try paying attention to what is written instead of trying to be combative to almost every poster here. Is it in your general nature to try to be a pain in the * all the time?

    Parent
    Well (5.00 / 0) (#26)
    by Steve M on Thu Oct 16, 2008 at 11:03:23 PM EST
    The article uses the Small Business Administration's definition of "small business," and you posted a long rant about how ridiculous the article's definition is and how it shows the author just has an axe to grind.

    Of course YOU didn't mention the Small Business Administration - because it would have completely undermined your rant.  Most people would see it as completely unremarkable, and not "laughable" at all, to use the Small Business Administration's definition of "small business."

    Where the argument is that we shouldn't raise taxes on small businesses because they are the main creators of jobs, it makes perfect sense to use a definition of "small business" that includes only businesses which actually employ people.

    Parent

    You don't know what you don't know (5.00 / 1) (#35)
    by Pepe on Thu Oct 16, 2008 at 11:42:44 PM EST
    You see the author gave you half the story in the same manner that politicians give you half the story - both leaving out what would kill their argument. The following information is something I have been following for years because my livelihood always depended on it in one form or another.

    From the SBA:

    When the U.S. Congress first established SBA, the fundamental question was just what numerical definition should SBA use to define small businesses, industry by industry, to determine what businesses were eligible for SBA's programs.  Over the years SBA has established and revised numerical definitions for all for-profit industries, and this numerical definition is called a "size standard."  It is almost always stated either as the number of employees or average annual receipts of a business concern.

    "or average annual receipts of a business concern".

    Again I never mentioned the SBA. I didn't because I was trying to keep my post clear and not muddy it with  additional mistruths that the author put forth to bolster his point. He never bothered to mention the "or" did he?

    Another fact you don't consider. The SBA categorizes businesses for the sole purpose of who their targets are for lending money to or who can participate in their programs. As such they don't factor in all existing businesses big or small. But that doesn't mean if you are not in their census that you can't get a loan. All is not black and white when it come to the SBA. 500 is the general number referred to when saying a business is SBA qualified but yet some industries can have more that 500 employees and in some businesses employees are not even counted. So when you see an author with an agenda loosely toss around citations, beware.

    BTW as part of my consulting I belonged to SCORE which consists of business people who donate their time to consult with small businesses on behalf of the SBA. I also helped businesses package SBA loan applications. So I am pretty familiar with the SBA thank you.

    Parent

    Your purpose here (none / 0) (#36)
    by Steve M on Thu Oct 16, 2008 at 11:44:57 PM EST
    seems to be to muster as much false indignation as possible in order to distract from the conversation, so I won't play this game any further with you.

    Parent
    Well you finally (none / 0) (#38)
    by Pepe on Thu Oct 16, 2008 at 11:53:19 PM EST
    admit it is a game you are playing. One can see you playing it up and down the thread with various posters - day after day, night after night, to what end is anyones guess.

    Parent
    Well, it seems pretty clear he has employees, (none / 0) (#47)
    by sarcastic unnamed one on Fri Oct 17, 2008 at 12:03:07 PM EST
    and directly creates jobs.
    Mark serves as of Chief Executive Officer of M.V. Hansen & Associates, Inc., Co-Founder of Chicken Soup for the Soul Enterprises, Inc and President of One Minute Millionaire, LLC.


    Parent
    You're exactly right (none / 0) (#22)
    by gyrfalcon on Thu Oct 16, 2008 at 10:54:19 PM EST
    Nevertheless, we freelance self-employed types are counted by the government as small businesses, and our numbers are included in the statistics about the number of jobs in small business.  It's a crock, IMHO, but I've never seen statistics that break out one-person freelance "small businesses" from those that actually employ more than the proprietor, have you?

    I suspect the Steven Kings of this world, who are usually at the center of very far-flung operations managing the endless lucrative spin-offs of their celebrity, don't actually fall under the definition of "small business" technically, but don't know.  I'd guess that Steven King is officially an employee of "Steven King, Inc.," or whatever his corporate identity is.

    Actually, Steven King is kind of an oddball personally, so who knows how he has it set up!  But most performing arts celebrities I think usually do it that way, setting up "production companies" and the like, in which they have part ownership and get paid some percentage of the revenues, rather than having their performance fees paid directly to the individual.

    Think David Letterman's Worldwide Pants operation.

    Parent

    Well (none / 0) (#25)
    by Steve M on Thu Oct 16, 2008 at 10:58:33 PM EST
    The linked article says:

    The Small Business Administration estimates that there were 6 million small businesses in 2005, as measured by those with fewer than 500 employees and with staff on the payroll other than the owner.

    Unless this misstates the SBA definition, it seems to address exactly what you asked - which is what I alluded to in my comment above.

    Parent

    But the article (none / 0) (#27)
    by gyrfalcon on Thu Oct 16, 2008 at 11:04:38 PM EST
    talks about folks who file Schedule C, and points out that vast numbers of people file that form, including Obama and McCain, because they do have some outside income from book royalties, rental properties, etc.  Those people aren't what I would call "small businesses," either.

    I'm not being very clear, I guess.  I'm wondering what percentate of "small business" is actually single freelancers.

    Parent

    I thought the article was clear (none / 0) (#30)
    by Steve M on Thu Oct 16, 2008 at 11:10:54 PM EST
    Obama and McCain are counted as small businesses by the McCain campaign's definition, but not by the SBA's definition.  That's why the article contends the SBA's definition is more accurate.

    If you want to know what percentage of "small businesses" are single freelancers, I need to know what definition of small businesses you are using.  If you want to use the SBA's definition of small businesses, then the answer is 0, I guess.

    Parent

    You just like to frigging argue (none / 0) (#37)
    by Pepe on Thu Oct 16, 2008 at 11:47:58 PM EST
    You do it with almost everyone here day and night. I don't understand the motivation with people like you who keep nibbling around the edges and tugging at pant legs until you can latch on to something that will bring you a meaningless victory. Does a meaningless argument on a blog really help you sleep at night?

    Parent
    Who shall throw the first stone? nt/ (none / 0) (#46)
    by lilburro on Fri Oct 17, 2008 at 11:41:43 AM EST


    Parent
    Yes, it covered me too for a while (5.00 / 1) (#13)
    by ruffian on Thu Oct 16, 2008 at 10:11:43 PM EST
    as an independent software consultant. But the point is that when Obama and McCain talk about small businesses, they are trying to invoke the image of a store, or a restaurant, or a small manufacturing business that creates jobs in the community.  They are using the broader IRS  definition to get the numbers they want, but invoking the image that they want for the resonance with voters.  


    Parent
    Well that's politics (none / 0) (#18)
    by Pepe on Thu Oct 16, 2008 at 10:44:51 PM EST
    isn't it? The fact that they both do it really negates the argument against McCain. Obama uses the same numbers when it is to his advantage and then abandons those numbers when talking about McCain - and vis versa. That doesn't wash with me. Just like an additional tax on people who are already paying a higher tax bracket doesn't wash with me especially when no one really knows where the money will actually be spent.

    Parent
    Btw, those Chicken Soup books (none / 0) (#11)
    by Cream City on Thu Oct 16, 2008 at 10:04:24 PM EST
    got my daughter through some difficult times as a teen, with a difficult chronic medical condition.  I learned to keep new ones ready for bad days.

    Thank your friend for me, please.  More small businesses like that, we could use in this country.

    Parent

    Mark is a brilliant wonderful man (none / 0) (#29)
    by Pepe on Thu Oct 16, 2008 at 11:10:33 PM EST
    who has such a positive glow about him. I am so fortunate to have meet him and got to know him.

    He would be sincerely thrilled to hear about how your daughter finds solace in the books he has co-authored. His purpose for writing them is to help people. As a result of his mission to help others he has done very well for himself. Compassion does reward. I too am happy for both you and your daughter and wish her the best of health and a full recovery and happy life.

    Parent

    A lot of people I know (none / 0) (#41)
    by andrys on Fri Oct 17, 2008 at 05:12:55 AM EST
    enjoyed the AI 6 book too.  Treated poor Sanjaya well  :-)

    Parent
    Thanks. There is no recovery (none / 0) (#45)
    by Cream City on Fri Oct 17, 2008 at 09:48:32 AM EST
    or cure for her condition, but it is under control -- after it and the daily meds have ruined so much for her, messing with her ability to finish college despite a fine mind, etc.  

    But it also gave her strengths such as determination and compassion that have helped find a career, become a fine manager of others . . . and a marvelous daughter for this mother (much as I never thought we'd get to this point, as I don't know where she got that cussedness of hers that carried her through :-).

    There is no recovery from so much in life; there is only coping and overcoming, as was affirmed for her in books such as the Chicken Soup series and others that I kept finding for her as I could.

    But no school or book can teach compassion; that comes from extraordinary experiences and a context that gives good perspective.  I recommend that every parent take even healthy kids to a children's hospital on a monthly basis, to see what she saw there.  Children and teens get over their innate self-centeredness fast, their "why me?" syndrome, when they see kids without limbs, without hair from chemo, etc. -- and see those kids smiling and glad to be alive at all.  

    Parent

    It was a slip (none / 0) (#10)
    by Salo on Thu Oct 16, 2008 at 10:03:00 PM EST
    I don't even think he believes it himself.  MOney isn't like Manure. If everyone has it it is debased currency. Moneny is among other things power--power over people and power over posessions.

    Parent
    It was undisciplined, that's for sure (none / 0) (#43)
    by ruffian on Fri Oct 17, 2008 at 05:49:14 AM EST
    It makes it hard to argue in his favor against my Republican friends when he agrees with their "redistribution of wealth" framework.

    and I am trying my best, despite my reservations.  He could through me a bone every now and then.

    Parent

    Because he (none / 0) (#40)
    by Wile ECoyote on Fri Oct 17, 2008 at 04:43:17 AM EST
    will do none of that with the money.

    Parent
    just for $&its and giggles (1.00 / 0) (#1)
    by patriotgames on Thu Oct 16, 2008 at 08:59:52 PM EST
    What IF Obama wins and he raises taxes across the board, ignores healthcare, ignores (or demonizes) women, and gives massives federal gifts to his chums? In other words, what if he acts like he has been the last year or so (not how he SAYS he will act, but how he acts).

    Misogiony in the primary.
    Lunge to the Right.
    Misdirection on healthcare.
    Out right Lying about Campaign Finance and FISA.

    M O U S E.

    Uh... (5.00 / 0) (#3)
    by Thanin on Thu Oct 16, 2008 at 09:36:44 PM EST
    we'd be against him?  Seems like a fairly obvious answer.

    Parent
    Not so (5.00 / 1) (#4)
    by Salo on Thu Oct 16, 2008 at 09:38:54 PM EST
    Most of the people getting patronage and basking in one of their own winning will make any excuse to cover for the various outrages presented above. Human nature i'm sorry to say.

    Parent
    Can I interest you in a pretzel? (5.00 / 0) (#7)
    by nycstray on Thu Oct 16, 2008 at 09:56:00 PM EST
    There's going to be a lot of twisting going on if he doesn't suddenly become a liberal in office  ;)

    I figure they'll defend him for a year or 2 and call folks r@cist etc if they don't fall in line, but it will be old around the 2010 elections as the repubs try and take back some seats. This is, of course, only if he takes the please republicans route aka "Unity" where the Dems get thrown under the bus.

    Parent

    That might be... (1.00 / 0) (#5)
    by Thanin on Thu Oct 16, 2008 at 09:47:22 PM EST
    your human nature.  Personally if he did everything that was suggested as president, I would absolutely be against him.

    Parent
    Please read what I said. (5.00 / 0) (#8)
    by Salo on Thu Oct 16, 2008 at 09:59:54 PM EST
    Those enjoying patronage and basking in the reflected glory...

    dios mios.


    Parent

    I read what you said... (1.00 / 0) (#21)
    by Thanin on Thu Oct 16, 2008 at 10:51:25 PM EST
    and, since you didnt provide any actual evidence of your assertion, it just seemed reasonable that youre drawing off of your own personal nature.

    Parent
    Well, as the wife of a man who owns his own (none / 0) (#14)
    by Angel on Thu Oct 16, 2008 at 10:21:19 PM EST
    business, I don't like the fact that he is being singled out for paying higher taxes.  This is his reward for the 25 years of blood, sweat and tears that it took to build this business into what it is today?  Why should he be penalized for taking an extreme risk, for being bold and courageous and wanting to work for himself and to do a job that he believes is important?  All some people see is the money that someone makes, they don't see what went into making that money.  We lived on my salary while he tried to get his business up and running; we sacrificed time together, time with our families, time with our friends, vacations, and many other things to make a go of it.  He consistently worked near 80 hours per week for many years, and he still works at least 60 hours per week.  So now, after 25 years, he's had a little success and it will be taxed at a higher rate simply because he owns a small business. Man, that's really an incentive to succeed.

    I'm confused (5.00 / 1) (#15)
    by Steve M on Thu Oct 16, 2008 at 10:28:15 PM EST
    Small businesses are not being singled out.  There is a tax increase for everyone making over $250,000, period.

    Parent
    Where he's being targeted is in new payroll taxes. (none / 0) (#19)
    by Angel on Thu Oct 16, 2008 at 10:48:05 PM EST
    Perhaps you should read all the fine print for Obama's proposals.  

    Parent
    Perhaps you could show me (5.00 / 1) (#20)
    by Steve M on Thu Oct 16, 2008 at 10:50:00 PM EST
    where small businesses are "singled out," because I don't think they are.

    Parent
    Perhaps you should look at our tax returns for (none / 0) (#23)
    by Angel on Thu Oct 16, 2008 at 10:58:03 PM EST
    the past 25 years. This stuff is hard to understand for those who are not familiar with how things work, no slur intended.  All these politicians try to make it sound so simple when it isn't.  I'm telling you, read the fine print and you'll see what he wants to do.  

    Parent
    No, you need to support (none / 0) (#28)
    by gyrfalcon on Thu Oct 16, 2008 at 11:07:46 PM EST
    your contention that small businesses like yours are being "singled out."  So far, you haven't been able to.

    And I have to say, if your taxable income -- that is, income from the business after expenses -- is over $250,000, I can't see where you come off being indignant about being asked to chip in an extra $1,500 or so in taxes.

    Parent

    How do you think a business grows? It's through (none / 0) (#31)
    by Angel on Thu Oct 16, 2008 at 11:13:42 PM EST
    profit.  You have to make money to be able to put it back into the business.  It isn't as simple as you'd like to believe.  If everything is taxed at an exhorbitant rate then there's nothing left!  Go out and work your a$$ off for 25 years, keep people employed, put money into the local economy, support local charities, do everything we've done and then come back and speak to me about being indignant.  

    Parent
    You're just railing (none / 0) (#32)
    by gyrfalcon on Thu Oct 16, 2008 at 11:24:30 PM EST
    for the sake of railing, from what I can see.  You aren't making the least bit of sense.  Business income that's plowed back into the business isn't at issue here, only personal income.

    Nobody's talking about taxing at an exhorbitant rate, so you've just made that up.

    And you might want to look into what the federal income tax rates were back in the '60s and '70s, just for chuckles.

    We really did quite well as a society and an economy when the top tax rate was 90 percent.

    Parent

    What income do you think is plowed back into (none / 0) (#44)
    by Angel on Fri Oct 17, 2008 at 08:02:01 AM EST
    the business?  It's OUR personal income.  You've obviously never owned or run a business, at least one not similar to ours (yes, I own part of the business).  We don't sell widgets.  We sell ideas, knowledge, expertise.  And who takes the risk for everything related to the business?  We do.  We have to have the ideas, we have to fund the company, we have to hire and pay the employees (including insurance and retirement plans; yes, we are that generous), we pay all the taxes: sales, income and property, we pay for all the insurance - liability, etc.  The list goes on.  There is HUGE RISK in owning a business.  If one assumes all the risk, shouldn't that person get the rewards?  Yes, they should.  I don't believe you truly understand the taxing situation we are in and I won't try to educate you further.  Lots of people here who love to talk about what they don't know.  I'm not one of them; at least not on this subject.  I'll post nothing further.

    Parent
    Are you arguing that the 90% top tax rate (none / 0) (#48)
    by sarcastic unnamed one on Fri Oct 17, 2008 at 12:09:19 PM EST
    caused our society and economy to do quite well?

    Parent
    If you (none / 0) (#34)
    by cal1942 on Thu Oct 16, 2008 at 11:30:55 PM EST
    made money pay the taxes.  If you put profit into expansion it was to make more money. Pay the taxes.

    Parent
    Pay the taxes.... (none / 0) (#49)
    by kdog on Fri Oct 17, 2008 at 02:50:53 PM EST
    or we'll send men with guns to take the taxes...then take you.

    How civilized:)

    Parent

    Hmmmm (none / 0) (#50)
    by cal1942 on Sat Oct 18, 2008 at 12:52:07 AM EST
    No taxes = no government

    No government = no civilization

    Parent

    I hear ya.... (none / 0) (#51)
    by kdog on Sat Oct 18, 2008 at 07:35:15 AM EST
    I just wonder sometimes how civilized civilization really is, considering all the ways tax dollars are spent to tyrannize, torture, and kill...though I understand it is a necessary evil.

    I've taken to calling taxation the original sin of civilization.

    Parent

    And (none / 0) (#52)
    by cal1942 on Sat Oct 18, 2008 at 04:25:10 PM EST
    you would be WRONG.

    Parent
    Must be nice to be so sure.... (none / 0) (#53)
    by kdog on Mon Oct 20, 2008 at 11:29:14 AM EST
    that taking from an individual at the barrel of a gun is RIGHT.  Pardon me for my doubts.

    Parent
    No Slur - Really (none / 0) (#33)
    by cal1942 on Thu Oct 16, 2008 at 11:28:50 PM EST
    This stuff is hard to understand for those who are not familiar with how things work, no slur intended

    A slur is a slur and including 'no slur intended' doesn't change that fact.

    Parent

    this is comparable (none / 0) (#39)
    by cpinva on Fri Oct 17, 2008 at 01:31:44 AM EST
    to the 1% or so of estates that actually are liable for the estate tax, contrary to the propaganda spread by the republicans trying desperately to kill it.

    patriotgames:

    i don't know anyone dumb enough to believe sen. obama is some kind of raging progressive, he isn't. my support for sen. obama is, at best, tepid. he is the lesser of two evils. sen. clinton was/is my choice.

    va has a write-in section on its ballot.

    Fact-Check: At Most, 2% of Small Businesses Would Pay More Taxes Under Obama's Plan | 53 comments (53 topical)

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