Actually it’s my guide for me too, but as the saying goes, when the blind lead the blind .....they’re probably both Republicans. Wait a minute - it’s when the blind lead the blind .....both fall in the ditch. Wait - I think that’s the same thing.
You see, when I researched this area, I began to wonder if I really got the facts right. While I know the documentation is legitimate and as accurate as government stats can be, the logic absolutely escapes me - of course I may have interpreted the information incorrectly.
It was a shock for me to find out what was considered a "small business." If I’ve erred in my deductions please let me know. After listening to McCain complain, I figure that if his rants are accurate and honest, I must be wrong.
Since McCain has been beating the catastrophic tragedy of "tax on the small business," and making claims that, on the surface, may be taken by a segment of the country as valid, I decided to actually seek out some facts, those things that the McCain campaign doesn’t have time to do or is afraid to do or did do but does what it has become accustomed to do - lie.
As we will see, when McCain says that many "small business" will have their taxes increased he is being accurate. However, what he doesn’t tell the public is what constitutes a small business. When we see what a small business is, it becomes apparent that Obama is not going to raise taxes on the destitute small businesses or on any businesses that normal people would call small. Then by taking a look at the real numbers of Obamas non-taxed "small business," it will reveal even more interesting facts - not McFacts. So, first we’ll take a look at the definition of "small business" and then we’ll look at the real figures on "small businesses."
Definition of Small Business
First, coming up with a definition of "small business" is very difficult. It is defined in general terms and then defined in more specific terms based on the type of business. In some cases it is defined by the amount of money it makes for that particular kind of business. In other cases it is defined by the number of employees for that particular kind of business. For instance:
Subsector 316 – Leather and Allied Product Manufacturing
316110 Leather and Hide Tanning and Finishing: 500 Employees
316211 Rubber and Plastics Footwear Manufacturing: 1,000 Employees
You’ve got it. A business can be considered to be small with 1,000 employees.
Subsector 111 – Crop Production
111110 Soybean Farming $750,000
Subsector 445 – Food and Beverage Stores
445110 Supermarkets and Other Grocery (except Convenience) Stores $25,000,000
That’s right a business can be a "small business" when it earns $25,000,000. 25 million dollars. Actually it can go higher than that.
Source: U. S. Small Business Administration
Table of Small Business Size Standards
Matched to North American Industry Classification System Codes
EPA-HQ-OAR-2007-1018-0062.pdf
http://www.regulations.gov/...
http://www.regulations.gov/...
Other definitions are the following: Go ahead and skip these; they’re in here to show how varied the definitions are.
A "small business concern" is defined by section 3(a) of the Small Business Act 15 U.S.C. 632(a) and implemented by the Small Business Administration under 13 CFR part 121, or any successor provisions. The Small Business Act defines an eligible small business as one that is independently owned and operated and not dominant in its field of operation. According to SBA size standards, most businesses are considered small. If you need further clarification, please visit www.sba.gov or contact the FHLBI at (317) 465-0368.
www.fhlbi.com/housing/cipdefea.asp
For SEC purposes, small businesses are defined as domestic companies with revenues of under $25 million, and not investment companies. Subsidiaries of larger companies do not qualify as small businesses.
www.sec-nasd-regulations.com/glossary.htm
Now with a definition firmly under control - would you believe almost understood, how about a total mystery? Anyway, we’ll take a look at the area on which McCain has focused his attack and ask the question, "How honest is McCain in his assessment of the effect of Obama’s planned tax increase on small businesses earning over $250,000?"
The following are taken from 2002 Census.
http://www.census.gov/...
Employment Size of Establishments
A number of sources provide information by employment size of establishment: the annual County Business Patterns and several reports from the 2002 Economic Census, including even statistics by ZIP Code. Most students prefer to define small business in terms of the size of the entire company or firm, not individual establishments. For example, most researchers would prefer to classify a large fast-food chain as a large company rather than as a collection of small establishments.
Employers and Nonemployers
About three quarters of all U.S. business firms have no payroll. Most are self-employed persons operating unincorporated businesses, and may or may not be the owner's principal source of income. Because nonemployers account for only about 3.4 percent of business receipts, they are not included in most business statistics, for example, most reports from the Economic Census. Since 1997, however, nonemployers have grown faster than employer firms.
Employers and Nonemployers, 2002
---------------------------|| Firms--------|| Establishments-||Sales or Receipts ($1,000)
All firms------------------|| 23,343,821 || 24,846,832-------|| 22,832,560,524
Nonemployers
(firms with no payroll)---|| 17,646,062 || 17,646,062-------|| 770,032,328
Employers
(firms with payroll)------|| 5,697,759--|| 7,200,770--------|| 22,062,528,196
Note that the vast majority of small businesses do not employee anyone (17,646,062). Also keep in mind that some states allow people to incorporate easily so that getting a real gauge on which businesses are "real" is difficult. It also allows certain politicians to "cook" the numbers. Does McCain include the 17,646,062 that have no employees. SInce the census includes no data on the earnings of those seventeen million, determining which ones fall above or below the proposed $250,000 barrier can not be done by either side. Thus, they have to be excluded, which I have done,
First the stats:
Receipt Size of Firms
Receipt Size of Employer Firms, 2002
Employer firms: The number of known companies.
Firms: 5,697,759
Establishments: 7,200,770
Paid employees: 112,400,654
Annual payroll ($1,000): 3,943,179,606
Sales or Receipts ($1,000): 22,062,528,196
Employment size of enterprise making less than $100 thousand
Firms: 1,291,552
Establishments: 1,292,473
Paid employees: 1,945,928
Annual payroll ($1,000): 26,447,381
Sales or Receipts ($1,000): 64,040,172
Employment size of enterprise making less then $100 to $499 thousand (Since I could not find info about the number under $250,000, Obama’s cut off point (it only showed $500,000, I just divided that by two).
Firms: 2,387,780 divided by two 1,193,890
Establishments: 2,396,006
Paid employees: 8,724,876
Annual payroll ($1,000): 167,457,202
Sales or Receipts ($1,000): 596,925,336
5,697,759 Total firms
1,291,552 Less than $100 thousand
1,193,890 Adjusted to be less than $250 thousand
That means that of small business that have employees, approximately 2,485,442 out of 5,697,759 will not have taxes increased at all. Is this a reasonable figure. Almost half of the businesses would not receive any increase in taxes.
Next question: Should small businesses that make more than 1 million dollars have their taxes increased? Note that 891 businesses that earn more than $2.5 billion are included in the "small business" category. Small? This is when I begin to think that I must be mistaken, but if a person were running a gasoline refining business, how small is small?
Receipt Size -------------Number of Firms
$1 to $4.9 million---------906936
$5 to $9.9 million---------138195
$10 to $49.9 million------122785
$50 to $99.9 million------15895
$100 to $249.9 million---8732
$250 to $499.9 million---2880
$500 to $999.9 million---1544
$1 to 2.499 billion---------1056
$2.5 billion or more-------891
------------------------------------------------
Total Number of businesses earning between $250,000 and $1 million is approximately 2,013,403.
Total Number of businesses earning more than $1 million is 1,198,914.
Total Number of businesses earning more than $5 million is 291,978.
------------------------------------------------------------------------
This means that less than half of the small businesses earning less than $1,000,000 would be taxed. Since the tax will be graduated or progressive, they would experience very little increase. With deductions, they are very likely to pay what they have been paying. Their effective corporate income tax rates were in 2004:
Lowest Quintile: 0.3%
Second Quintile: 0.4%
Middle Quintile: 0.6%
Fourth Quintile: 0.8%
Highest Quintile: 4.1%
Source: Congressional Budget Office. Effective tax rates equal the amount of tax liability divided by income. See Congressional Budget Office, Effective Federal Tax Rates, 1979–1997 (October 2001) and Effective Federal Tax Rates, 1997 to 2000 (August 2003), as well as Web-only updates that extend the period of analysis through 2003.
Side Note: Sit down and figure how much you really pay in taxes, you might be surprised. In 2007 on a professor’s salary I paid 13.6% Federal Individual Income Tax. The effective tax rate for my income range was between 6% and 8%. Is that too much for what the country is getting?