Bush/Cheney are Small Businessmen

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Registered: 08-05-2004
Bush/Cheney are Small Businessmen
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Sat, 10-09-2004 - 12:56am
Here's the orginial link: http://factcheck.org/article.aspx@DocID=265.html

A Bush-Cheney ad says Kerry would raise taxes for 900,000 "small businesses" and "hurt jobs." It's a big exaggeration.

September 23, 2004

Modified: October 1, 2004

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Summary



A Bush-Cheney '04 ad claims Kerry would raise taxes on 900,000 small businesses and "hurt jobs." But it counts every high-salaried person who has even $1 of outside business income as a "small business owner" -- a definition so broad that even Bush and Cheney have qualified while in office. In fact, hundreds of thousands of those "small businesses" have no jobs to offer.

Furthermore, by the Bush definition 32 million "small businesses" would see no tax increase. The ad doesn't mention that, of course. Nor does it mention Kerry's proposals for some tax cuts specifically targeted for small businesses.

(Update, Oct. 1: After this article was posted, the Tax Policy Center issued a new estimate that the number of small employers is 471,000 -- barely half the number the Bush ad claims.)

Analysis



A Bush ad released Sept. 17 claims that under Kerry's tax plan, "900,000 small business owners would pay higher tax rates than most multinational corporations" and that would "hurt jobs."

Bush-Cheney '04 Ad

"Common Sense vs. Higher Taxes"

Bush: I'm George W. Bush, and I approve this message.

Announcer: President Bush and our leaders in Congress have a common sense plan to grow our economy...

(Graphic: President Bush & Congressional Plan: Small Business Job Growth; New Skills Through Education; A Fairer, Simpler Tax Code)

Announcer: And create jobs so small businesses can expand and hire.

The liberals in Congress and Kerry's Plan: Raises taxes on small businesses. Nine-hundred-thousand small business owners would pay higher tax rates than most multinational corporations.

(Graphic: "Liberals in Congress & Kerry’s Plan: Raises Taxes on 900,000 Small Business Owners Small Businesses Pay More Taxes Than Big Corporations")

Announcer: Tax increases would hurt jobs, hurt small business and hurt our economy.

(Graphic: "Liberals in Congress And Kerry’s Plan: Higher Taxes Hurt Our Economy")

Actually, Kerry proposes no specific tax increase on small businesses at all, and in fact is proposing some targeted tax cuts for small businesses. What the Bush ad refers to is Kerry's proposal to raise taxes on individuals making more than $200,000 per year.

Republicans argue that taxing the affluent is, in effect, taxing many small business owners who pay taxes on their business income reported on their personal returns. And that's true enough.

But what we said last December in an article de-bunking a similar tax fable bears repeating here:

FactCheck.org (Dec. 19, 2003): By twisting statistics and over-hyping, Republicans are spoiling for themselves what would otherwise be a perfectly serviceable argument: lowering taxes on the most affluent Americans does indeed lower taxes on many small businesses, and thus creates more jobs. But not nearly as many as . . . Republicans are claiming.

It is true that what Kerry proposes would return the top rates on individuals making over $200,000 to 35% and 39.6%, compared to the nominal top rate for large corporations, which is 35%. Where the Republican argument goes off the rails is in inflating the number of "small businesses" affected by raising rates on those high-income individuals. Republicans count any individual as a "small business owner" who reports even as little as $1 of income from a sole proprietorship (reported on schedule "C" of federal income-tax returns), a partnership, or a "Subchapter S" corporation (one with fewer than 75 stockholders). In fact, the majority of those being counted as "small businesses" are really individuals who aren't primarily business owners, and a huge number have no employees.

Bush & Cheney as "Small Business Owners"

To find examples of this we need look no farther than the top of the Bush-Cheney ticket:

*

President Bush himself would have qualified as a "small business owner" under the Republican definition, based on his 2001 federal income tax returns. He reported $84 of business income from his part ownership of a timber-growing enterprise. However, 99.99% of Bush's total income came from other sources that year. (Bush also qualified as a "small business owner" in 2000 based on $314 of "business income," but not in 2002 and 2003 when he reported his timber income as "royalties" on a different tax schedule.)

*

Vice President Cheney and his wife Lynne qualify as "small business owners" for 2003 because 3.5% of the total income reported on their tax returns was business income from Mrs. Cheney's consulting business. She reported $44,580 in business income on Schedule C, nearly all of it from fees paid to her as a director of the Reader's Digest . But giving the Cheneys a tax cut didn't stimulate any hiring; she reported zero employees.

Other examples of those counted as "small businesses" would include doctors, lawyers, accountants and management consultants who organize their practices as partnerships, and journalists who accept occasional fees for speeches or articles.

Who Would Be Affected?

When the nonpartisan Urban-Brookings Tax Policy Center ran the Kerry plan through its computer model, it projected that in 2005 a total of 995,000 persons with "business income" (or business loss) would see a personal tax increase under Kerry's plan. That's in line with various Republican calculations that put the total at up to 1 million or more.

But here's what the Tax Policy Center also found about those "small business owners" who would see their taxes go up:

*

Only 49% of them actually got most of their income from business (485,000 of them).

*

The large majority have no employees aside from themselves. Of the 487,000 who reported any business income on Schedule C, only 71,000 claimed deductions for wages -- fewer than 15% .

To be sure, Kerry's plan would in effect raise taxes on considerably more than 71,000 small-business owners with employees. The Tax Policy Center could not determine how many owners whose businesses are partnerships or Subchapter S corporations both had employees and reported income high enough to be affected. Those types of businesses tend to be larger and more likely to have employees than the owners of sole proprietorships who typically report on Schedule C. Census Bureau figures from 1997 show that 28% of all partnerships had employees, and 77% of all Sub-S corporations. It is also true that at least some businesses that have no direct employees other than the owner still create jobs by hiring contractors for services.

Still, it is clear that the Bush ad's 900,000 figure greatly exceeds the number of job-creating businesses that would be affected by Kerry's proposed tax increase. And the vast majority of small businesses would not be affected at all.

(Update, Oct 1: The Tax Policy Center refined its estimates after we posted this article and came up with a figure of 471,000 small employers who would see a tax increase under Kerry's proposal, including an estimate of sub-S and partnership filers who have employees. Buy this estimate, the figure used in the Bush ad is nearly double the real number.)

Who Would Not Be Affected

Bush's own Treasury Department estimates that a total of 33 million "small businesses" benefited from the Bush tax cuts on individuals, but most of them are in lower tax brackets. So -- even accepting the 900,000 figure used in the Bush ad -- that leaves more than 32 million "small businesses" not affected by an increase in the top rates on individuals.

It should also be noted that Kerry is proposing several tax cuts specifically targeted to small businesses, including a refundable tax credit aimed at reducing the cost of health-care benefits, eliminating capital-gains taxes for "long-term investments" held for five or more years in small businesses, and a "new jobs tax credit" for small businesses that add new jobs in 2005 and 2006. What Kerry is proposing for small business can be found on his website .

Sources



Neil Bradley, " Tax and Spend Democrats ," House Republican Study Committee, 25 March 2004.

2000 Federal Income Tax Returns of George & Laura Bush , Tax History Project

2001 Federal Income Tax Returns of George & Laura Bush , Tax History Project.

2002 Federal Income Tax Returns of George & Laura Bush , Tax History Project.

2003 Federal Income Tax Returns of George & Laura Bush , Tax History Project.

2003 Federal Income Tax Returns of Richard & Lynne Cheney , Tax History Project.

2003 Public Financial Disclosure of Richard Cheney , Opensecrets.org.

2003 Public Financial Disclosure of George W. Bush , Opensecrets.org.

David Wessel, "Undoing Tax Cuts Will Have Little Impact On Small Businesses," Wall Street Journal, 1 April 2004: A2.

Urban-Brookings Tax Policy Center, "Kerry Plan vs. Current-Law, Size of Individual Income Tax Change, 2005 - - Distribution Tables by Size of Tax Cut - 2005" Table T04-0144 , 16 Sep 2004.

US Census Bureau, "Statistics about Business Size (including Small Business)from the U.S. Census Bureau," website, accessed 23 Sept 2004.

"A New Era of Opportunity for Small Business," fact sheet, Kerry-Edwards 2004, undated.

Tax Policy Center Newsletter , "Kerry Tax Plan and Small Businesses," 30 Sep 2004.

Related Articles

Puncturing a Republican Tax Fable

GOP fact-twisters claim 80% of the tax relief given to the rich goes to job-creating small businesses. Don't believe it.

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iVillage Member
Registered: 10-10-2004
Sun, 10-10-2004 - 9:51am
I agree. I am a small business owner so I suppose I would hire all kinds of people based on what the Republicans are saying. That is highly unlikely. In my business (construction), it really isn't the taxes that keep us from hiring employees. There are many other factors and at this point in our business the only taxes we pay other than income tax on what we make, are payroll taxes. When I pay an employee and deduct for social security and medicare, I have to match that for each employee. That does add up to a lot but it doesn't compare to what we pay for insurance. Workers' Compensation premiums are so outragegously high that we can't charge our customers enough to cover that expense. For example, if we do a roof, the premium for worker's compensation is $50 per $100 of payroll! Obviously I have to pass that on to my customer but there are people who work without insurance and therefore, can charge less and lets face it, most people will go with the lower bid. Therefore, I do not have any employee's, only subcontractors who can provide me with proof they have their own insurance. It is the only way I can be competitive and still make some money. It just got too expensive to have employee's but not becuase of the taxes.

iVillage Member
Registered: 08-31-2003
Sun, 10-10-2004 - 12:20pm
Thanks for sharing that. I just went to factcheck, there are also articles that expose Kerry's distortions also, is there a reason you are only linking us to Republican stories? Are you trying to share accurate information or just promoting anything that supports your bias? Just curious.
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iVillage Member
Registered: 08-05-2004
Sun, 10-10-2004 - 12:23pm
I haven't been to factcheck in a while. I mainly just post whatever I read. I mainly get stuff from other newsgroups and message boards. And I do post stuff dealing with my political views, as do other people here.
iVillage Member
Registered: 08-31-2003
Sun, 10-10-2004 - 12:23pm
I'm listening to Tony Brown right now, he has a gentleman that has a business that makes around 250,000 a year. He is saying that he can't find enough employees that are willing to actually work. He has plently of jobs available, and no problem seemingly to pay them, his complaint is that they just don't want to do the work, they want to make $ with minimal out put.
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iVillage Member
Registered: 08-31-2003
Sun, 10-10-2004 - 12:25pm
Ok, you simply post anything to discredit the President then, is that right? You aren't interested in anything that may challenge Kerry and Edwards?


Edited 10/10/2004 12:26 pm ET ET by alicia2210
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iVillage Member
Registered: 08-05-2004
Sun, 10-10-2004 - 12:39pm
I thought this was the place to defend your political views?
iVillage Member
Registered: 08-31-2003
Sun, 10-10-2004 - 1:00pm
I have no problem with someone defending their political views. I guess what I don't understand is what I see as intellectual dishonesty. How can one honestly defend their own candidate against another when they only seek out information that supports their candidate and discredits the other, and seemingly bypassing anything that is not so flattering to their own candidate. If one only looks for information from one point of view, how can their point of view be credible? Finding out that your candidate has his/her failings isn't such a bad thing, after all, they are humans and have failings, I'd be really concerned about any candidate that seems too perfect. Maybe it's just me, but it was a serious question, do you only care about the information that support your choice and discredits the other?
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iVillage Member
Registered: 08-05-2004
Sun, 10-10-2004 - 1:29pm
This board provides me information people have on Kerry as well as the other newsgroups I'm in. I do not trust Bush personally. There are enough people out there voicing out against him, not just myself. I've read enough on Kerry to know I can trust him, personally. Now I know other people don't have the same views as me and that's where this board comes in. Where people, and myself, can post their views, right? If there is something out there that is true about Kerry and isn't in favor of him, then I'll be happy to read it. So far I haven't really heard anything against Kerry except from Bush about his record on the senate and how he's sending mixed messages and a flipflopper. So far I haven't seen any proof of Kerry's senate record and I, personally, haven't seen Kerry flipflop. He actually uses his brain to make smart decisions and if he finds something is wrong, he'll change it, unlike our current President who can't admit to ONE mistake.
iVillage Member
Registered: 08-31-2003
Sun, 10-10-2004 - 2:16pm
If you don't mind me asking you a few questions regarding your comments:

"This board provides me information people have on Kerry as well as the other newsgroups I'm in. I do not trust Bush personally."

Are these democratic/liberal slanted newsgroups? (I ask based on the information that is often posted.) Why don't you trust Bush personally? What has he done that makes him untrustworthy to you?

"There are enough people out there voicing out against him, not just myself."

same can be said from the Republican side, what is the difference that you choose to believe the positives of Kerry and the negatives of Bush.



"I've read enough on Kerry to know I can trust him, personally. "

Why? What has convinced you? Or is it more of a feeling because share the same views, or is it because you distrust Bush so much that you have to trust Kerry?


"If there is something out there that is true about Kerry and isn't in favor of him, then I'll be happy to read it. So far I haven't really heard anything against Kerry except from Bush about his record on the senate and how he's sending mixed messages and a flipflopper. So far I haven't seen any proof of Kerry's senate record and I, personally, haven't seen Kerry flipflop. He actually uses his brain to make smart decisions and if he finds something is wrong, he'll change it,"

Kerry record is out thereyou just may have to look to sources other than those that want you to believe that Bush does nothing but lie. You may agree with all his votes so you don't have a problem with his voting record. It has been clear that you are rather liberal in your views, so that wouldn't surprise me. Have the stats been presented in ways that favor President Bush and not Kerry, absolutely. Just as Kerry has done the same. Neither candidate has been completely candid it all that they say, none the less, facts are facts, and there is truth in the claims regarding Kerry's senate record. Kerry also has flip flopped, I am sure that some of those *flip flops* have been the result of garnering more information and therefore changing ones mind, but not all have been. I'm sure that some of his appearant flip flops have been the result of him misspeaking, but not all have been. And some of his flip flops have been in hindsight. As the saying goes, hindsight is 20-20, changing an opinion on hindsight is fine, but to slam someone for making a decision without the benefit of hindsight (an impossibility) is disingenuous.

" He actually uses his brain to make smart decisions and if he finds something is wrong, he'll change it, unlike our current President who can't admit to ONE mistake."

You know, you had me until this comment. Rhetoric, Rhetoric, Rhetoric. Bush is stupid, Bush doesn't have a brain. You know this how? It's nothing but a derogatory, slimy, sound bite. Something that I thought the Democratics just 1 month ago were claiming that they didn't stoop to. And we wonder why there is so much divisiveness and intolerance in politics and our society in general. Maybe all these independents like Nader that say that both parties are really the same, I'm beginning to understand. Even though you haven't answered my original question, I've got my answer. Thanks!

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iVillage Member
Registered: 08-07-2004
Sun, 10-10-2004 - 4:00pm
But isn't it true that W won't admit to any mistakes?

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