Wednesday, October 29, 2008

Experts See Little Difference Between Obama's & McCain's Plan for Small Businesses

From Kansas

As the presidential campaign is in its final week, John McCain and Barack Obama each argue that his tax plan is better to help the ever suffering small-businessman.

Tax experts, however, suggest that the candidates' blueprints for helping small business are virtually identical for all but 2 percent to 3 percent of the highest-income small businesses. For them, McCain's plan is more generous.

The issue has been a campaign centerpiece since the emergence earlier this month of "Joe the Plumber," an Ohio voter who would benefit under Obama's plan but favored McCain's because it preserves the current tax brackets.

"Joe's dream is your dream," McCain said Monday night at a rally in Pottsville, Pa. "It's to own a small business that will create jobs, and the attacks on him are attacks on small businesses all over this nation. They should be ashamed."

Here's what the candidates actually propose. McCain wants to leave in place President Bush's tax cuts of 2001 and 2003 that lowered the top tax bracket from 39.6 percent to 35 percent and lowered the capital gains tax, a tax on profits, to 15 percent.

Obama would let those tax cuts expire on Jan. 1, 2011, as called for under current law, for individual tax filers whose adjusted gross income exceeds $200,000, and for joint filers whose adjusted gross income is more than $250,000.

The Democratic nominee assured a rain-soaked crowd Tuesday in Chester, Pa., "If you make less than a quarter of a million dollars a year, which includes 98 percent of small business owners, you won't see your taxes increase one single dime."

Both candidates' comments have created confusion by giving the impression that the term "small business" is somehow a special tax designation. It's not.

"People think that small businesses pay a tax and their tax is being increased," said Eric Toder, a tax analyst at the Tax Policy Center, a nonpartisan research organization in the nation's capital. "There is a perception that more people are affected by this than actually are."

So who's right?

Roughly 75 percent of small businesses file as individual tax filers, not corporations, and most report their business income using various tax forms, called schedules, for income from business ventures, farming or rental properties.

Using these three income-reporting categories, the Tax Policy Center has concluded that 1.9 percent of all individual filers reporting business income would see their taxes go up under Obama's plan. Of those who get more than 50 percent of their income from business ventures, 2.7 percent would pay higher taxes.

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