Re-Examining Obama's Econ Record

Despite Weaknesses In The Economy, Obama Has Called For Tax Increases That Would Impact Job Creation And Slow Growth:

The Wall Street Journal: Obama's Tax Increases Would Impact Job Creation, And Would "Likely Produce Unimpressive Growth And Job Numbers In The First Year Of The New Obama Presidency, And Likely Beyond." "The reality is that the creators of new jobs in the economy are more likely to be rising entrepreneurs or filers under Subchapter S, who typically pay taxes at individual rates. Hanging three or four tax millstones around their productive necks in January if the economy is weak will likely produce unimpressive growth and job numbers in the first year of the new Obama Presidency, and likely beyond. That in turn could drag down the Democrats in Congress who will get credit for voting these higher taxes into law." (Editorial, "ObamaTax 3.0," The Wall Street Journal, 9/9/08)

The [Manchester, NH] Union Leader: Obama's Planned Tax Increases Would "Have Negative Economic Effects." "Sen. Barack Obama knows that tax increases harm the economy. So why does he still plan to raise taxes if he is elected President? Obama plans to let a big portion of President Bush's tax cuts of 2001 and 2003 expire. That in itself would be a monumental tax increase. It also would push the U.S. corporate tax rate -- already the highest in the world -- higher. ... The sad part is: Obama knows that his plan will have negative economic effects. But he's push ing it anyway because populism wins votes, regardless of whether it's actually good for America." (Editorial, "Obama's Admission: Tax Hikes Hurt The Economy," The [Manchester, NH] Union Leader, 9/11/08)

The Las Vegas Review-Journal Called Obama's Tax Hikes "A Recipe For Economic Disaster." "[Obama] wants to the raise tax rate on the top income bracket from 35 percent to 39.6 percent, nearly double the tax rate on capital gains and dividends, and eliminate all tax breaks for the gas and oil industries and private equity firm managers. Talk about a recipe for economic disaster." (Editorial, "More Class Warfare," Las Vegas Review-Journal, 9/20/07)

Obama Would Raise Taxes On Small Businesses And Seniors
Two-Thirds Of Small Business Income Would Be Subject To Obama's Significantly Higher Tax Rates. "The conservative argument (and that of the John McCain campaign) is that Obama's stated plan to raise taxes on households making $250,000 or more in income is a tax increase on small business. The simple answer to this dilemma can be found in the IRS Statistics of Income Bulletin (Table 1.4, for those who are interested). So what do the data say? In 2006 (the latest year available), $706 billion of such income was reported to the Internal Revenue Service. Of this, about half was reported by households in the top marginal income tax rate. Interestingly, two-thirds of this income was reported by households making $250,000 per year or more -- the very same households that Obama wants to increase taxes on. The Obama campaign maintains that the number of small-business owners is what's important. Economists kn ow what matters is the tax rate that's applied to the bulk of small-business income. Make no mistake about it: Obama's plan to raise taxes on households making more than $250,000 will raise taxes on most small-business profits in America." (Grover G. Norquist, Op-Ed, "An Argument Against Obama's Tax Plan," The Politico, 7/11/08)

According To An Analysis By The Tax Policy Center, Obama Would Raise Taxes On Nearly 10 Million Senior Households. "Even though Senator Obama's plan eliminates individual income taxes for seniors with incomes less than $50,000, his plan would raise taxes for almost 10 million senior households, over a third of the total." (Len Burman, Surachai Khitatrakun, Greg Leiserson, Jeff Rohaly, Eric Toder, and Bob Williams, "A Preliminary Analysis Of The 2008 Presidential Candidates' Tax Plans," http://www.taxpolicycenter.org, 6/20/08, p. 28)

"On Average, Seniors Would Face A Tax Increase Of About 2 Percent Of Income." (Len Burman, Surachai Khitatrakun, Greg Leiserson, Jeff Rohaly, Eric Toder, and Bob Williams, "A Preliminary Analysis Of The 2008 Presidential Candidates' Tax Plans," http://www.taxpolicycenter.org, 6/20/08, p. 28)
Obama's "Patriot Employers" Plan Would Impose Significant Tax Increases That Would Make "U.S. Companies Less Profitable And Less Competitive World-Wide":

Obama's Proposal Penalizes Most American Companies That Have Subsidiaries Abroad With "A Big Tax Increase." "Under Mr. Obama's plan, 'patriot employers' qualify for a 1% tax credit on their profits. To finance this tax break, American companies with subsidiaries abroad would have to pay the U.S. corporate tax on profits earned abroad, rather than the corporate tax of the host country where they are earned. Since the U.S. corporate tax rate is 35%, while most of the world has a lower rate, this amounts to a big tax increase on earnings owned abroad." (Editorial, "Obama's 'Patriot' Act," The Wall Street Journal, 2/27 /08)

"Put Another Way, U.S. Companies Would Suddenly Have To Pay A Higher Tax Rate Than Their Chinese, Japanese And European Competitors." (Editorial, "Obama's 'Patriot' Act," The Wall Street Journal, 2/27/08)
"Apparently Mr. Obama Believes That By Making U.S. Companies Less Profitable And Less Competitive World-Wide, They Will Somehow Be Able To Create More Jobs In America." (Editorial, "Obama's 'Patriot' Act," The Wall Street Journal, 2/27/08)
Obama Voted In Favor Of The Democrats' FY 2009 Budget, Which Raises Tax Rates For Americans Earning $42,000 Or More:

Obama Voted Twice In Favor Of The Democrats' FY 2009 Budget Resolution. (S. Con. Res. 70, CQ Vote #85: Adopted 51-44: R 2-43; D 47-1; I 2-0, 3/14/08, Obama Voted Yea; S. Con. Res. 70, CQ Vote #142: Adopted 48-45: R 2-44; D 44-1; I 2-0, 6/4/08, Obama Voted Yea)

The Democrats' Budget Raises Taxes On Individuals Earning Approximately $42,000 Or More. "The resolution Obama voted for would not have increased taxes on any single taxpayer making less than $41,500 per year in total income, or any couple making less than $83,000. The $32,000 figure is approximately the taxable income of a single person making $41,500 per year, after all deductions and exclusions." (FactCheck.org, "The $32,000 Question," http://www.factcheck.org, 7/11/08)

NOTE: The Democrats' Budget Raises Tax Rates On The 25, 28, 33 And 35 Percent Brackets. For 2008, The 25 Percent Bracket Begins At The Taxable Income Level Of $32,550, Which Is The Figure After All Deductions And Exclusions Are Subtracted From Total Earnings. ("2008 Individual Income Tax Rates, Standard Deductions, Personal Exemptions, And Filing Thresholds," http://www.taxpolicycenter.org, 11/4/07; Andrew Taylor, "Presidential Hopefuls To Vote On Budget," The Associated Press, 3/13/08)

Aside From Calling For Higher Taxes, Obama Still Lacks A Coherent Economic Message:

This Late In The Game, It Is Still Unclear What Is Obama's "Ideology" On Economics. "Obama, on the other hand, has ... a less obvious ideology. Well before this point on the presidential calendar, it's usually clear where a candidate fits within the political spectrum of his party. With Obama, there is vast disagreement about just how liberal he is, especially on the economy. ... Some of the confusion stems from Obama's own strategy of presenting himself as a postpartisan figure. A few weeks ago, I joined him on a flight from Orlando to Chicago and began our conversation by asking about his economic approach. He started to answer, but then interrupted himself. 'My core economic theory is pragmatism,' he said, 'figuring out what works.' This, of course, is not the whole story. Invoking pragmatism doesn't hel p the average voter much; ideology, though it often gets a bad name, matters, because it offers insight into how a candidate might actually behave as president." (David Leonhardt, Op-Ed, "How Obama Reconciles Dueling Views On Economy," The New York Times Magazine, 8/24/08)

"For All His Skills As A Storyteller And A Speaker, He Has Not Settled On A Compelling Message About How To Put The Economy On The Right Path." (David Leonhardt, Op-Ed, "How Obama Reconciles Dueling Views On Economy," The New York Times Magazine, 8/24/08)
Obama's Lack Of An Economic Message Has Contributed To His "Worst Moments" On The Campaign Trail, And Resulted In Policies "That Seem More Political Than Economic." "The lack of such a message [on the economy] has contributed to several of his worst moments over the last year. Most recently, the campaign has come out with a series of small-bore, populist energy plans -- a windfall-profits tax on oil companies, a crackdown on speculators, a partial opening of the strategic oil reserve -- that seem more political than economic. The most glaring misstep on this score was his comment this spring about bitter rural voters clinging to guns and religion. It was, in effect, an admission that his own message about the economy hadn't yet broken through." (David Leonhardt, Op-Ed, "How Obama Reconciles Dueling Views On Economy," The New York Times Magazine, 8/24/08)

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McCain's Small-Business Bunk
July 14, 2008
He claims 23 million small-business owners would pay higher tax rates under Obama. He's wrong. The vast majority would see no change, and many would get a cut.
Summary
McCain has repeatedly claimed that Obama would raise tax rates for 23 million small-business owners. It's a false and preposterously inflated figure.

We find that the overwhelming majority of those small-business owners would see no increase, because they earn too little to be affected. Obama's tax proposal would raise rates only on couples making more than $250,000 or singles earning more than $200,000.

McCain argues that Obama's proposed increase is a job-killer. He has a point. It's true that increasing taxes on those at the top would leave them less money for other purposes, including investment and hiring in the case of business owners. But the number of business owners who would see their rates go up would be only a small fraction of what McCain says. Many would see their taxes go down.

Analysis
Sen. John McCain has been making this false claim over and over, starting with a July 7 speech announcing his "jobs for America" plan:

McCain, July 7: Senator Obama's tax increases will hurt the economy even more, and destroy jobs across this country. If you are one of the 23 million small-business owners in America who files as an individual rate payer, Senator Obama is going to raise your tax rates.

He repeated it in an address to the League of United Latin American Citizens the next day:

McCain, July 8: Keeping individual rates low isn't intended as a favor to wealthy Americans. 23 million small-business owners pay those rates, and taking more money from them deprives them of the capital they need to invest and grow and hire.

He said it again at a campaign event July 9:

McCain, July 9: If you are one of the 23 million small-business owners in America who files as an individual rate payer, Senator Obama is willing to raise your tax rates.

And he repeated it in the first of a planned series of radio addresses July 12:

McCain, July 12: If you are one of the 23 million small-business owners who files as an individual rate payer, watch out ? because as your business grows, my opponent proposes to raise your taxes.

But repeating a falsehood doesn't make it true. McCain's 23 million claim is a bogus figure.


Outdated, Inflated, Inapplicable


To justify the 23 million figure, McCain spokesman Brian Rogers referred us to a press release by the U.S. Chamber of Commerce, which refers to "23 million small business owners" without citing a source. That is actually an outdated count of all the businesses in the United States, produced by the U.S. Census for 2002, when the Economic Census counted a total of 23,343,821 business firms of all sizes. Of those, 16,845 firms employed 500 persons or more, which still leaves just over 23.3 million classified as "small" by the widely accepted definition that we will use here.

That figure is six years out of date. The U.S. Small Business Administration Office of Advocacy estimates the total number of "small" firms with fewer than 500 workers reached 26.8 million in 2006. That's the most recent estimate. But it is also inflated. Since the total U.S. population was just under 300 million in 2006, it would mean that one in every 11 Americans ? men, women and children ? is a "small-business owner."

It turns out, SBA's estimate includes more than 20 million "nonemployer" firms, an unknown number of them sideline or hobby businesses run by persons who actually make their living some other way. Census and SBA count as a "small business" anyone who reported as little as $1,000 of business receipts. By that very broad definition, John McCain himself is a "small-business owner," because his tax return shows Schedule C income from book royalties. For that matter, Barack Obama would also be a small-business owner, by virtue of his book income. As would President Bush and Vice President Cheney, as we pointed out in 2004. Of the 26.8 million that SBA counts as "small businesses," fewer than 6 million are actually "employer firms" with any payroll.

From this, we must conclude that to arrive at his 23 million figure, McCain is counting mostly "business owners" with no workers, including those who simply report small amounts of income from sideline or freelance work. McCain is arguing that Obama's tax increase would "destroy jobs," but he's counting mostly firms that don't produce any.

That in itself is seriously misleading. If McCain wants to focus on the effects of Obama's plan on employment, he would do better to confine his count to employers ? the just under 6 million firms that actually have workers. And even that figure wouldn't be applicable because Obama's tax increase wouldn't fall on all employers, only on those in the top two income tax brackets.



McCain Campaign's Statement


1. These small businesses are subject to Sen. Obama's pay or play health care plan: The tax will either be in the form of health insurance to
workers or cash to the government.

2. Further, even giving Obama the benefit of the doubt, if they make
over $250,000 and file as individuals or have capital gain or dividends, their taxes go up, as Obama has promised.

Note US Chamber cites 23 million figure: "The U.S. Chamber is proud to pay special tribute to some of its most valued constituents: America's
23 million small business owners"McCain's Non-explanation


McCain cannot justify his 23 million claim. We asked McCain spokesman Brian Rogers for substantiation and received

"shudder [img]/LDPforum/ubbthreads/images/%%GRAEMLIN_URL%%/grin.gif[/img]" Re-cycled lies?
Lower Taxes for Many


While Obama's plan would raise rates at the top, it also would grant what he calls a "Making Work Pay"? tax credit of up to $500 per person, or $1,000 per working family. Since this credit would not begin to phase down for couples making less than $150,000, we judge it likely that many, if not most of the 23 million that McCain counts as "small-business owners" would likely get tax reductions.


An Echo of Bush


McCain's claim struck us as wildly improbable the first time we heard it because we debunked a much less expansive claim that President Bush made about John Kerry in 2004. Bush ran a TV ad saying that Kerry's proposal to raise taxes on persons making more than $200,000 a year would affect 900,000 small-business owners. We found Bush's number to be far too high. We noted that Bush was counting as a "small-business owner" anyone who reported even $1 of business or partnership income, regardless of how the taxpayer made their living. At that time, the Urban-Brookings Tax Policy Center estimated that a total of 471,000 small-business employers could be affected.

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