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Fact Check

Discussion in 'The Lounge' started by wrbanwal, Oct 16, 2008.

  1. wrbanwal

    wrbanwal Well-Known Member

    Dec 27, 2005
    Fact check: Plumber Joe's taxes


    McCain has entrepreneurs spooked about tax hikes, but fewer than 2% of small business owners would pay more under Obama's plan.

    Almost half of small-business owners say they're worse off than they were three years ago, according to a recent Zogby poll. Below is a look at entrepreneurs' top concerns, and at which presidential candidates they think will be best for business.
    As banks clamp down on lending, companies are struggling to survive. Entrepreneurs around the U.S. wrote in to tell us how they're weathering the turmoil.

    (CNNMoney.com) -- In speech after speech, presidential candidate John McCain hammers on the claim that his rival Barack Obama will raise taxes on many small businesses.

    At the debate on Wednesday night, McCain said, "The small businesses that we're talking about would receive an increase in their taxes right now."

    More typically he has said: "What [Obama] hasn't told you is that he would tax half of the income of small businesses in America," a line used in La Crosse, Wisc., last week.

    Should small business owners fear for their wallets if Obama is elected? Not the vast majority, business and tax experts say.

    To make its claim, according to a McCain spokesman, the campaign counts as a small-business owner any taxpayer who files a Schedule C, E or F - the forms used to report gains and losses from business ventures and farms.

    Using that definition and citing IRS data, the campaign notes that "56.8% of total small business income is earned by businesses in the top two rates, which Barack Obama has pledged to raise."

    It's true that Obama has proposed raising taxes on the top two income rates.

    But there are three main problems with McCain's charge.
    What is a small business?

    First, it relies on a broad definition of what counts as a small business, including everyone who files a Schedule C, E and F.

    But most people who file those forms don't run a business for a living: Those forms are also used to report income from freelance and consulting work, real-estate rentals, and most other non-salary sources.

    For example, McCain and Obama both file Schedule C returns, thanks to their book royalties - but they hardly should be considered small business owners.

    In 2005, there were 21.5 million Schedule C returns filed, according to the IRS.

    A more realistic definition of small businesses turns up far fewer firms. 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.
    Who pays?

    Second, even using the broad definition of small business that McCain likes, very few owners would see their own taxes rise.

    That's because the lion's share of taxable income comes from a small number of wealthy businesses. Out of 34.7 million filers with business income on Schedules C, E or F, 479,000 filers fall into the top two brackets, according to an analysis of projected 2009 filings by the nonpartisan Tax Policy Center.

    The other 34.3 million - or 98.6% - would be unaffected by Obama's proposed rate hike.

    That includes Joe "The Plumber" Wurzelbacher, whom McCain invoked nearly two dozen times at the debate Wednesday night to illustrate the plight of the average worker and small business owner.

    "Joe wants to buy the business that he has been in for all of these years ... he wanted to buy the business but he looked at your tax plan and he saw that he was going to pay much higher taxes," McCain said.

    In an interview afterward with WTOL, Wurzelbacher acknowledged that he'd still like to eventually buy the plumbing company he works for but that he wouldn't yet be hit by higher taxes.

    "I want to set the record straight: Currently I would not fall into Barack Obama's $250,000-plus," he said. "But if I'm lucky in business and taxes don't go up then maybe I can grow the business and be in that tax bracket - well, let me rephrase it. Hopefully, that tax won't be there."

    Few owners are that lucky in business. In a member survey conducted late last year, the National Federation of Independent Business (NFIB) found that only 14% of respondents said they had $200,000 or more in annual income.

    As Tax Policy Center fellow Len Berman recently told Fortune Small Business: "Most owners of small businesses have small incomes."
    What gets taxed?

    Third, even if you're one of the rare business owners making enough money to be affected by Obama's proposed tax increases, you still won't see a big hike in your tax bill.

    McCain's claim that Obama "will increase taxes on 50% of small business revenue" - the line he used in the second presidential debate - is incorrect because of how income is taxed.

    If a business owner falls into the top bracket, that doesn't mean that all of his or her income is taxed at the highest level.

    For example: If a small-business owner makes $210,000 in taxable income, he edges into the 33% bracket, one of the two top tax rates that Obama would like to raise.

    But he would pay the higher tax only on the amount that exceeds the cutoff - in 2007, the two top tax rates applied to single filers with income of $160,850 or more and joint filers with income of at least $195,850. As a single filer, this business owner would see his federal taxes increase $1,475 under Obama's plan, which calls for raising the 33% tax rate to 36%.

    "While Obama does favor raising the top two rates, the quote is not true because not all the small business income of those in the top two rates is taxed at the 33% and 35% rates," said Gerald Prante, a senior economist at the nonpartisan Tax Foundation.

    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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  2. wrbanwal

    wrbanwal Well-Known Member

    Dec 27, 2005
    Is Obama planning a Gestapo-like "civilian national security force"?


    I read a quote from Rep. Paul Broun from Georgia which stated that Obama wants to set up a civilian national security force that was similar to the "Gestapo" or the Nazi Brownshirts.

    What is the truth behind Obama's statements that he wants to create a "civilian national security force that's just as powerful, just as strong, just as well-funded [as the military]"?


    This false claim is a badly distorted version of Obama's call for doubling the Peace Corps, creating volunteer networks and increasing the size of the Foreign Service.
    This question stems from an interview that Republican Rep. Broun of Georgia gave to The Associated Press Nov. 10. The story carried a headline, "Georgia congressman warns of Obama dictatorship." It said that Broun "fears that President-elect Obama will establish a Gestapo-like security force to impose a Marxist or fascist dictatorship." And it quoted him this way:

    Rep. Paul Broun, Nov. 10: It may sound a bit crazy and off base, but the thing is, he's [Obama's] the one who proposed this national security force. ... That's exactly what Hitler did in Nazi Germany and it's exactly what the Soviet Union did.

    Similar claims have been circulating in right-leaning blogs and conservative Web sites ever since July, when Obama made a single reference to a "civilian national security force" in a campaign speech in Colorado. Obama's detractors make much of his expansive (and exaggerated) description of such a force as being "just as powerful, just as strong, just as well-funded" as the U.S. military. They also ignore the context.

    Obama was not talking about a "security force" with guns or police powers. He was talking specifically about expanding AmeriCorps and the Peace Corps and the USA Freedom Corps, which is the volunteer initiative launched by the Bush administration after the attacks of 9/11, and about increasing the number of trained Foreign Service officers who populate U.S. embassies overseas.

    Here is the relevant portion of what Obama actually said, with the sentences quoted selectively by Broun and others in bold.

    Obama, July 2, Colorado Springs, CO: [As] president I will expand AmeriCorps to 250,000 slots [from 75,000] and make that increased service a vehicle to meet national goals, like providing health care and education, saving our planet and restoring our standing in the world, so that citizens see their effort connected to a common purpose.

    People of all ages, stations and skills will be asked to serve. Because when it comes to the challenges we face, the American people are not the problem – they are the answer. So we are going to send more college graduates to teach and mentor our young people. We'll call on Americans to join an energy corps, to conduct renewable energy and environmental clean-up projects in their neighborhoods all across the country.

    We will enlist our veterans to find jobs and support for other vets, and to be there for our military families. And we're going to grow our Foreign Service, open consulates that have been shuttered and double the size of the Peace Corps by 2011 to renew our diplomacy. We cannot continue to rely only on our military in order to achieve the national security objectives that we've set.

    We've got to have a civilian national security force that's just as powerful, just as strong, just as well-funded. We need to use technology to connect people to service. We'll expand USA Freedom Corps to create online networks where American can browse opportunities to volunteer. You'll be able to search by category, time commitment and skill sets. You'll be able to rate service opportunities, build service networks, and create your own service pages to track your hours and activities.

    This will empower more Americans to craft their own service agenda and make their own change from the bottom up.

    Does that sound like a force that could kick down your door in the middle of the night and haul you off to a Gulag or concentration camp? You decide.

    -Brooks Jackson
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