About That Small Business Tax Thing

Here's another good explanation of just how unfriendly Barack Obama's plan is to small businesses (emphasis mine):

Since the mid-1990s, the small business sector has created 78.9% of the net new jobs in the United States, reports the Office of Advocacy at the Small Business Administration. Sen. Obama is claiming his proposed tax hike on incomes over $250,000 will hardly stifle job creation in this key job-producing sector because "98% of small businesses make less than $250,000."

The 98% figure may be correct, but it conceals more than it reveals, just as Obama's description of Weatherman bomber Bill Ayers as "a guy who lives in my neighborhood who's a professor of English" was accurate but deceiving.

Obama gets to his reassuring 98% figure by lumping firms with no employees, the majority of small businesses, with small businesses that have 50 or 100 employees. Census data show that 79% of all American companies, counting both large and small firms, have no employees.

Similarly, the SBA's Office of Advocacy reports that 52% of small businesses in the U.S. economy are home-based — that is, not exactly the heavy-hitters when it comes to job creation.

As the New York Times reported regarding the makeup of the nation's 27 million small businesses: "According to figures compiled by the Small Business Administration, there are fewer than six million small businesses that actually have employees. The rest are so-called non-employer firms that report income from hobbies or freelance work done by their registered owners, earning as little as $1,000 a year."

By treating a lemonade stand the same as a home builder with 100 employees, Obama can get away with saying that 98% of small businesses in America won't be hit by his proposed increases in income taxes.

He's telling the 59 million employees in the small-business sector there's almost no chance, specifically a 2% chance, that their jobs or incomes will be negatively affected by his proposed tax hikes and policies to "spread the wealth around." In fact, Obama's proposed tax hike on incomes over $250,000 is precisely aimed at the small businesses that are generating the highest revenues and hiring the most workers.

"Two-thirds of small business profits are earned in households making more than $250,000 per year," reports Americans for Tax Reform. "In 2006, $473 billion of the $706 billion of small business profits was earned in households Obama has said he would raise taxes on."

Obama's proposed increases in income taxes and Social Security taxes would shift the bulk of the profits in the small-business sector to the federal coffers, reports Americans for Tax Reform:

"The tax rate on the lion's share of small business income could reach 54.9% under a President Obama. The individual top rate will climb from 35% to 39.6% and the Social Security/Medicare tax rate could climb from 2.9% to 15.3%. Put those together and you get 54.9%."

By increasing costs, Obama's higher business taxes would have the direct effect of increasing layoffs and raising prices. His proposed 54.9% tax rate would be the highest since the Carter administration, when the nation's unemployment and inflation rates peaked, respectively, at 7.6% and 13.5%.

"Obama's tax increases will only affect you if you have a 401(k), have any savings, buy things from small businesses or are looking for a job," explains Grover Norquist, president of the Americans for Tax Reform. "If you fall into one of these categories, his policies will take money out your pocket. Otherwise, you're fine."

With federal income taxes, Obama additionally says that "95% of working families will get a cut." That, in fact, is not possible because over a third of these households don't pay federal income taxes.

Rather than being permitted to keep more of their own earnings via a tax cut, Obama is actually proposing that they'll get to pocket someone else's money as part of his "spread the wealth around" agenda.

Similarly, Obama is saying that those making less than $250,000 a year "will not see one dime's worth of tax increases." Once again, what he's not saying is that his tax hikes on businesses will be passed on to consumers by way of higher prices.

This is critical information for people to see and understand.  Obama talks a great line about tax cuts and small businesses, but his plans are the exact same recipe for economic disaster that Jimmy Carter put into effect.  Can't we look to history to learn from our mistakes without repeating them?

Obama can't, apparently.

Spread this information around as far and wide as you can.  People need to understand the effects of Obama's empty promises.

There's my two cents.