Obama’s Tax Plan Exposed, The Destruction of Small Business And Why McCain Won the Presidential Debate October 15, 2008

In this third and final debate, the key issue was the economy, primarily the clarification of the tax plan of each candidate.  The key was not those impacted among individual employees, but how businesses would be impacted, specifically small businesses.

Obama, while saying he will only increase taxes on those earning more than $250,000 a year, includes American business in his cross hairs.  And while $250K seems like a large sum, most small businesses operate well in excess of that amount and will be severely impacted.  The distribution of the tax will be uneven and specifically unfair to those businesses that are more capital intensive and have more employees.

In response to our original article, many expressed concern because Obama did not state clearly whether he was speaking of taxing gross or net business income in the debate. Some believe Obama is trying to be intentionally misleading on the issue, so we decided to clarify.

What we have found in our research is that Obama does say, buried deeply on his website, that the amount to be taxed would be the business’ net profit, not the gross receipts.  If it had been gross receipts, that would have shut the doors on many small businesses in America overnight.

Still, there is a major concern with his plan, because what Obama qualifies as a small business is totally suspect. Small businesses, according to the Small Business Administration, have average incomes in the millions of dollars and can employ hundreds. This site provides a summary.

So, if the Small Business Administration data is correct, how can Obama claim that 90-98% of American small businesses would be excluded from his tax increase?  The lie in Obama’s plan is that he is including sole proprietorships which aren’t really businesses; they are just individuals filing taxes that are not on a W2. That includes the maid, a lone painter, etc. These are businesses by tax qualifications only, not true businesses in any sense of the word.  They do not employ anyone, and they do not provide the same benefits to the nation as real businesses which employ people that also contribute to the tax base.

Let’s examine this.

First, Obama attempts to delude people that make less than $250,000 that they will benefit under his tax plan.  The plan, at first, does seem beneficial for the person in a normal job working for a US-based company.  It is true that most of those people do not make more than $250K, so they would get a tax cut.  Great plan, right?  Think again.  How many of these people work for small businesses?  If you do, you definitely should consider how Obama’s plan to increase your employer’s taxes could cost you a raise or even your job.

Second, and most importantly, when Obama speaks of taxing only those that make more than $250,000, he groups in what he claims are small businesses that have a net profit of over $250,000.  He has often referenced statistics stating how this applies to small businesses in America.  These statistics are not only misleading, they are an outright lie and the cornerstone of Obama’s campaign.

Obama states that at least 90% of small businesses make less than $250K, but the huge flaw in that statistic is it includes the sole proprietor.   These people are not making more than $250K on average any more than the average person does in any other job in America.  They are not considered a “business” for any other reason than they do not get paid via a W2 (with automatic deductions).  They do not operate as a true business, they do not employ others, and they essentially are not a business at all in any real sense of the word.

Joe the Plumber and Small Businesses

What we are most interested in are small businesses that provide jobs, and how those businesses will be impacted.  We want statistics that isolate small businesses that employ people, genuine small businesses.

The expert on small business in America is the Small Business Administration.  This SBA does a great job at summarizing the incomes and employment limits for many businesses to qualify as a “small business”.  None are as low as $250,000, some employ hundreds, and all would pay significantly higher taxes under Obama’s plan.

Obama claims that the companies, even though their taxes will rise sharply, will pay lower taxes than under Reagan.  That is a lie as well.  The rate could potentially be well north of 50% if you count Social Security contributions (a point that Obama conveniently glosses over).  Then consider the added expense of health plans (which Obama wants to force upon all businesses).  It is the highest tax rate since the Carter years, and we all know how that turned out…record unemployment.  Tack on the cost of health care and you have a small business disaster waiting to happen.

Why is this dangerous and why is it easy for Obama to mislead the average citizen?  The concept of taxing a business based on its net income sounds good to the average American when you throw out what seems like a large number to most of them.  Most don’t earn that much money, so we are just taxing the rich, right?

Wrong, a company’s net income is not what the proprietors take home.  It is extremely different from earned wages.  It is the money left after expenses for the prior business year, such as salaries paid, equipment depreciated, etc.  Most businesses reinvest large portions of their profits to grow the business, or in some cases, to just keep up with inflation.   If there are no profits, there is no money to invest.

In addition, the distribution of the tax does not take into consideration that businesses are vastly different from one to the next.  Some are more capital intensive, some employ more than others and others operate in areas with a significantly higher cost of living (New York versus Mississippi for example).

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9/26 Presidential Debate 2008: How Can Liberals Say Obama Won? You Have To See This.

This segment has 30 comments from Senator Obama in this debate that are direct quotes from the transcript with our responses to each.  Here are the quotes and our responses. All quotes are taken directly from the transcript.

When asked about our current financial crisis, Obama responded

1. “But we’re also going to have to look at, how is it that we shredded so many regulations? We did not set up a 21st-century regulatory framework to deal with these problems. And that in part has to do with an economic philosophy that says that regulation is always bad.”

Fact is, there are much heavier regulations than ever on our businesses. The reporting of stock options, Sarbanes Oxley, and stricter SEC reporting requirements have cost corporate America billions, sent some into bankruptcy, often forcing them to sell to larger corporations or severely delaying financial reports. We allow Chinese companies, like China Energy Savings Technology (CESV) enter our markets without any proof of their viability and let them steal American investors money as they collapse when it is proven they never had a viable business in the first place or any of the cash they claimed they had. Don’t you think you should instead prevent that and help American Companies reduce their costs so they can create more jobs?

In addition, what specific regulations do you think were shredded Senator Obama?  Wasn’t it Barney Frank, a Massachusetts Democrat, that backed bills specifically to force banks to provide mortgages to people that were not credit worthy, and wasn’t it also Barney Frank and the Democrats that fought legislation by the Bush administration in 2003 that would have more stringently regulated Fannie Mae and Freddie Mac?  Didn’t government regulations instituted and endorsed by Democrats lead to this problem in the first place?

2. “I mean, we’ve had years in which the reigning economic ideology has been what’s good for Wall Street, but not what’s good for Main Street.”

Wasn’t Wall Street doing swimmingly well during Bill Clinton’s reign with record low interest rates set by Alan Greenspan? Didn’t Main Street benefit with record low unemployment and strong job creation? We fail to see the correlation between Wall Street doing well and Main Street doing badly.

3. “Well, Senator McCain is absolutely right that the earmarks process has been abused, which is why I suspended any requests for my home state, whether it was for senior centers or what have you, until we cleaned it up.”

But didn’t you do that after you decided to run for President Senator? Prior to that you appeared to clearly support the earmark system asking for $932 million for your state alone.

4. “What I do is I close corporate loopholes, stop providing tax cuts to corporations that are shipping jobs overseas so that we’re giving tax breaks to companies that are investing here in the United States.”

Specifically what loopholes do you close? You seem to imply you want to provide loopholes to companies investing IN the United States. Would that include Exxon? Didn’t you criticize John for tax breaks that would include the oil companies?

5. “And I pay for every dime of it.”

Senator, with all due respect, you don’t pay for diddly squat. We do, including your salary. If you mean you have a way for US to pay for all your 400 billion dollars worth of programs, show us how. We don’t believe it. Words are cheap.

6. “My definition — here’s what I can tell the American people: 95 percent of you will get a tax cut. And if you make less than $250,000, less than a quarter-million dollars a year, then you will not see one dime’s worth of tax increase.”

How will that sort of tax system pay for $400 billion dollars in new programs?

7. “John, you want to give oil companies another $4 billion.”

When you provide a corporate tax break, you cannot exclude certain businesses because they are successful. That is ludicrous. Your own tax plan says you will reward companies that invest in America. Many oil companies do, so wouldn’t your plan reward them too? Besides Senator, the oil companies are going to make that money anyway, because if you raise their taxes, they will just raise the price on gas and oil. You are just placing the burden on the consumer. Let the oil companies drill, build refineries and expand the use of other resources within the US at their expense. That will create jobs, lower the price of oil and gas and reduce our trade deficit allowing us to put that money to good use, like alternate energy sources for example.

8. “And if we want to talk about oil company profits, under your tax plan, John — this is undeniable — oil companies would get an additional $4 billion in tax breaks.”

But you have a tax program that would reward them as well, and how does that 4 billion stack up against your 400 billion in new programs you claim you can pay for?

9. When asked what programs he would give up…

“Well, there are a range of things that are probably going to have to be delayed.”

How long would you delay your promised programs? Until you are no longer in office perhaps, blaming the failure to institute those programs on the Republicans? We hope you don’t go that route Senator, because if there are reasons your programs cannot be instituted, and you really don’t have a plan to pay for them, you should be telling us now!

10. “We have to have energy independence, so I’ve put forward a plan to make sure that, in 10 years’ time, we have freed ourselves from dependence on Middle Eastern oil by increasing production at home”

OK, now we have heard enough. How do we increase production without drilling and without using coal and other natural resources more extensively? Will you stop talking about what you will do, and give us a fact or two on the hows?

11. “…most importantly by starting to invest in alternative energy, solar, wind, biodiesel, making sure that we’re developing the fuel-efficient cars of the future right here in the United States, in Ohio and Michigan, instead of Japan and South Korea.”

Japan constructs many of their cars here, providing American jobs. Many American corporations like General Motors have partnerships with Japanese car companies that have been mutually beneficial. The primary problem with the American auto companies has been poor quality and expensive labor. How do you suggest we get the companies to build more complex cars with better quality and with lower costs? Perhaps more automation? But wouldn’t that cut jobs?

In addition, it has been primarily American car companies that have fought mileage rules like you propose. The reason? The rules favor the smaller cars better manufactured in Japan and South Korea!  Perhaps you would do better getting higher mileage vehicles, on average, by shutting down American auto manufacturers?

12. “We have to fix our health care system, which is putting an enormous burden on families. Just — a report just came out that the average deductible went up 30 percent on American families.They are getting crushed, and many of them are going bankrupt as a consequence of health care. I’m meeting folks all over the country. We have to do that now, because it will actually make our businesses and our families better off.”

While we agree, wouldn’t it be better to get our costs under control like reducing the trade deficit before we attack such a huge problem? Estimates are your plan will cost at least $150 billion dollars. You want to cover people with pre-existing conditions, but wouldn’t that encourage people to just join the plan AFTER a health problem becomes obvious? The costs would be huge for that kind of plan.

13. “Well, look, I want to make sure that we are investing in energy in order to free ourselves from the dependence on foreign oil.”

How? Specifically, and on what time table? You don’t support drilling, you don’t support nuclear, you don’t support coal. Will we be converting our entire truck fleet in the United States to bio-diesel? How about our planes? Do you suggest solar power panels glued to the wings? Our hundreds of millions of cars? How about we make them all foot powered like Fred Flintstone’s?

14. “The problem with a spending freeze is you’re using a hatchet where you need a scalpel.”

We have a 700 billion dollar bail-out of our financial sector going on here Senator. That is a freakin’ shot gun, not a hatchet. And you claim all we need is a scalpel??!!!

15. “Let me tell you another place to look for some savings. We are currently spending $10 billion a month in Iraq when they have a $79 billion surplus. It seems to me that if we’re going to be strong at home as well as strong abroad, that we have to look at bringing that war to a close.”

The expense is huge, but would Iran stepping into Iraq be worse? Their influence with the Iraqi Shiites is huge. And can you imagine the genocide of Sunnis and Kurds if it happens? How about instead you tell Iraq they have to start helping pay for the war effort? Wouldn’t that make more sense than abandoning them? If they have the surplus you claim, it should not be any problem at all.

16. “And because of the economy’s slowing down, I think we can also expect less tax revenue so there’s no doubt that as president I’m go doing have to make some tough decision.”

We got that Senator, but we haven’t heard one likely tough decision you will make yet? Tell us one, just one!

17. “We are spending $300 billion on tax cuts for people who don’t need them”

That is a bunch Senator, could you please get explicit for a change and tell us what tax cuts? If you are referring to the Capital Gains and Dividends tax cuts, those help people that invest in America, then you should consider that a vast number of people in America are invested in our markets. Removing those benefits will make investing in America less popular. Tax breaks on dividends help retirees living on fixed incomes. Do you really want to pressure our stock markets further after this government induced fiscal calamity you blame on Wall Street?

18. “Senator McCain is absolutely right that the violence has been reduced as a consequence of the extraordinary sacrifice of our troops and our military families.”

So you are saying that “The Surge” worked? That it was the correct strategy?

19. “The war started in 2003, and at the time when the war started, you said it was going to be quick and easy. You said we knew where the weapons of mass destruction were. You were wrong. You said that we were going to be greeted as liberators. You were wrong. You said that there was no history of violence between Shiite and Sunni. And you were wrong.”

So were tons of people Senator, including many Democrats, and it doesn’t matter one iota to determine how to address the problems of today. Senator Lieberman, Al Gore’s Vice Presidential Candidate has specifically broken away from your party because of your beliefs in how to handle the war now, and they cannot be based on whether or not you were right seven years ago. You were wrong more recently about the Surge. Completely wrong. Do we want that kind of judgment in the Presidency? Both George Bush and Senator McCain were right, and you were wrong.

20. “And right now, the commanders in Afghanistan, as well as Admiral Mullen, have acknowledged that we don’t have enough troops to deal with Afghanistan because we still have more troops in Iraq than we did before the surge.”

Admiral Mullen said that we don’t have enough troops in Afghanistan. He never said it was because we had too many in Iraq and praises the soldiers in Iraq and the results of the Surge.

21. “When asked about more troops in Afghanistan: “Yes, I think we need more troops. I’ve been saying that for over a year now.”

But isn’t that the same tactic we employed in Iraq that worked?

22. “And if John wants to disagree with this, he can let me know, that, if the United States has al Qaeda, bin Laden, top-level lieutenants in our sights, and Pakistan is unable or unwilling to act, then we should take them out.”

Now, you say you do not endorse attacking Pakistan but you want to take out Al Qaeda in Pakistan. How do you do that without attacking? Didn’t we try this several times before, failing and accidentally killing innocent civilians? Didn’t that alienate the Pakistani population? Pakistan is a country with borders you must respect. What you are speaking of amounts to war on Pakistan.

23. “Well, let me just correct something very quickly. I believe the Republican Guard of Iran is a terrorist organization. I’ve consistently said so.”

Would you expect them to move into Iraq if we move out? How will you prevent that if we fully withdraw?

24. “But we are also going to have to, I believe, engage in tough direct diplomacy with Iran and this is a major difference I have with Senator McCain, this notion by not talking to people we are punishing them has not worked.”

Ask Jimmy Carter about how well diplomacy works with Iran. What experience do you have with international diplomatic negotiations and talks Senator? According to Israeli intelligence, Iran is already on the verge of having a nuclear bomb, and rumors have it they may attempt to take out Iran’s Nuclear sites as early as next month. How long do you think you have to negotiate?

25. “Senator McCain mentioned Henry Kissinger, who’s one of his advisers, who, along with five recent secretaries of state, just said that we should meet with Iran — guess what — without precondition. This is one of your own advisers.”

No, Henry Kissinger never said anything about negotiating without precondition. Later in the debate you deny this statement.

When McCain asked, ” Look, Dr. Kissinger did not say that he would approve of face-to- face meetings between the president of the United States and the president — and Ahmadinejad. He did not say that.”

You responded, “Of Course Not”.

You are wrong on one or the other Senator. That is the definition of double speak.

26. When confronted about McCain’s energy policy towards alternate energy, Obama stuttered “He — he — he objects…” When McCain denied it and said he has always voted in favor of alternative energy, Obama responded, “All right, fair enough. Let’s move on. You’ve got one more energy — you’ve got one more question.”

So it appears Obama wrongly accused McCain of policies against alternate energy and admitted it. Hmmm.

27. “Look, over the last eight years, this administration, along with Senator McCain, have been solely focused on Iraq. That has been their priority. That has been where all our resources have gone.”

So now that it is working, you want to destroy their progress?

28. “We have weakened our capacity to project power around the world because we have viewed everything through this single lens, not to mention, look at our economy. We are now spending $10 billion or more every month. And that means we can’t provide health care to people who need it. We can’t invest in science and technology, which will determine whether or not we are going to be competitive in the long term”

It seems like you are placing great weight on pulling out of Iraq for paying for all your programs, but suppose, just suppose you are wrong and we pull out and the violence starts all over again, civil war breaks out and genocide begins, and Iran and Al Qaeda strengthen in Iraq. Are you willing to take responsibility for that decision to better fund your health care program? Or will you, like everything else in your campaign, blame George Bush?

29. “Well, let me just make a closing point. You know, my father came from Kenya.”

Was he a Christian? In what religion were you raised? Now that you have distanced yourself from the pastor of your church for preaching “God Damn America”, what Christian church do you attend Senator? We have no problem if you are not Christian, but we do have a problem if you are lying about it.

30. “And part of what we need to do, what the next president has to do — and this is part of our judgment, this is part of how we’re going to keep America safe — is to — to send a message to the world that we are going to invest in issues like education, we are going to invest in issues that — that relate to how ordinary people are able to live out their dreams.”

We are sorry Senator, but that paragraph totally loses us. You can have all the dreams you want, but if someone puts a gun to your head and pulls the trigger, your dreams don’t mean squat.