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The Truth Behind Obama's 3% of Small Businesses Claim

Posted By Guinevere Nell On October 21, 2008 @ 11:43 am In Economics | Comments Disabled

Obama claims that his plan would only hurt 3% of small businesses. But this is highly deceptive. He isn’t lying, but the reports that he cites mean something very specific. They do not mean that 97% of small businesses won’t see higher taxes under Obama’s plan than they see today. Nor do they mean that these businesses would not see higher taxes under Obama’s plan than under McCain’s plan. All the statistic means when is that most businesses would not see higher taxes under Obama’s plan than they would see if the Bush Tax Cuts expire as they are scheduled to do in 2011, absent any new vote on them.

So, the statistic just means Obama’s plan isn’t an even bigger tax hike for most businesses than one which we can choose to introduce in 2011 by not renewing the current tax levels.

But Obama implies that he is extending enough of the Bush Tax Cuts that compared to them, he would not be raising taxes on 97% of business.But this isn’t the case. About 35% of small businesses would likely see a tax hike under Obama’s plan compared to the rates they face today. Comparing the Obama plan with the Bush tax cuts that are currently in place, those small businesses with incomes in the top quintile and especially in the top 5% had higher average marginal rates. A disproportionate number of businesses fall into that category. For those few at the very top, the rates would be even more punitive.
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It’s important to remember who the entrepreneurs are that would face higher taxes. These taxes hurt those – like famous Joe the Plumber – who wish to become successful, and they hurt different individuals each year. Each year new entrepreneurs fit this “rich” category as they climb the ladder of business success, maybe hoping one day to no longer file a 1040, but actually incorporate the business. But Obama would punish every success along the way, in order to “spread the wealth around.”

Obama would be instituting a major redistribution from successful entrepreneurs to unsuccessful ones, and any claims otherwise are simply dishonest.


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