Legion of Angels News Archive

(CNNMoney.com) – In speech after speech, presidential candidate John McCain hammers on the claim that his rival Barack Obama will raise taxes on many small businesses.

At the debate on Wednesday night, McCain said, “The small businesses that we’re talking about would receive an increase in their taxes right now.”

More typically he has said: “What [Obama] hasn’t told you is that he would tax half of the income of small businesses in America,” a line used in La Crosse, Wisc., last week.

Should small business owners fear for their wallets if Obama is elected? Not the vast majority, business and tax experts say.

To make its claim, according to a McCain spokesman, the campaign counts as a small-business owner any taxpayer who files a Schedule C, E or F - the forms used to report gains and losses from business ventures and farms.

Using that definition and citing IRS data, the campaign notes that “56.8% of total small business income is earned by businesses in the top two rates, which Barack Obama has pledged to raise.”

It’s true that Obama has proposed raising taxes on the top two income rates.

But there are three main problems with McCain’s charge.

What is a small business?

First, it relies on a broad definition of what counts as a small business, including everyone who files a Schedule C, E and F.

But most people who file those forms don’t run a business for a living: Those forms are also used to report income from freelance and consulting work, real-estate rentals, and most other non-salary sources.

For example, McCain and Obama both file Schedule C returns, thanks to their book royalties - but they hardly should be considered small business owners.

In 2005, there were 21.5 million Schedule C returns filed, according to the IRS.

A more realistic definition of small businesses turns up far fewer firms. The Small Business Administration estimates that there were 6 million small businesses in 2005, as measured by those with fewer than 500 employees and with staff on the payroll other than the owner.

Who pays?

Second, even using the broad definition of small business that McCain likes, very few owners would see their own taxes rise.

That’s because the lion’s share of taxable income comes from a small number of wealthy businesses. Out of 34.7 million filers with business income on Schedules C, E or F, 479,000 filers fall into the top two brackets, according to an analysis of projected 2009 filings by the nonpartisan Tax Policy Center.

The other 34.3 million - or 98.6% - would be unaffected by Obama’s proposed rate hike.

That includes Joe “The Plumber” Wurzelbacher, whom McCain invoked nearly two dozen times at the debate Wednesday night to illustrate the plight of the average worker and small business owner.

“Joe wants to buy the business that he has been in for all of these years … he wanted to buy the business but he looked at your tax plan and he saw that he was going to pay much higher taxes,” McCain said.

In an interview afterward with WTOL, Wurzelbacher acknowledged that he’d still like to eventually buy the plumbing company he works for but that he wouldn’t yet be hit by higher taxes.

“I want to set the record straight: Currently I would not fall into Barack Obama’s $250,000-plus,” he said. “But if I’m lucky in business and taxes don’t go up then maybe I can grow the business and be in that tax bracket - well, let me rephrase it. Hopefully, that tax won’t be there.”

Few owners are that lucky in business. In a member survey conducted late last year, the National Federation of Independent Business (NFIB) found that only 14% of respondents said they had $200,000 or more in annual income.

As Tax Policy Center fellow Len Berman recently told Fortune Small Business: “Most owners of small businesses have small incomes.”

What gets taxed?

Third, even if you’re one of the rare business owners making enough money to be affected by Obama’s proposed tax increases, you still won’t see a big hike in your tax bill.

McCain’s claim that Obama “will increase taxes on 50% of small business revenue” - the line he used in the second presidential debate - is incorrect because of how income is taxed.

If a business owner falls into the top bracket, that doesn’t mean that all of his or her income is taxed at the highest level.

For example: If a small-business owner makes $210,000 in taxable income, he edges into the 33% bracket, one of the two top tax rates that Obama would like to raise.

But he would pay the higher tax only on the amount that exceeds the cutoff - in 2007, the two top tax rates applied to single filers with income of $160,850 or more and joint filers with income of at least $195,850. As a single filer, this business owner would see his federal taxes increase $1,475 under Obama’s plan, which calls for raising the 33% tax rate to 36%.

“While Obama does favor raising the top two rates, the quote is not true because not all the small business income of those in the top two rates is taxed at the 33% and 35% rates,” said Gerald Prante, a senior economist at the nonpartisan Tax Foundation.

The bottom line: McCain’s claim only works by using an overly broad definition of what counts as a “small business” - and even with that definition, fewer than 2% of business owners would be hit by Obama’s proposed rate increase. For those who are affected, the increase would be levied only on a part of their earnings, not all of them.

Source — CNN

WASHINGTON - Former Republican Sen. Phil Gramm isn’t the first friend to give a presidential candidate heartburn. And based on recent history, another one will be along before John McCain or Barack Obama know it.

“You’ve heard of mental depression; this is a mental recession,” Gramm, a leading supporter of McCain, said recently, a less-than- sympathetic description of an election-year economy that features rising joblessness, a spike in mortgage foreclosures and a declining stock market.

“We have sort of become a nation of whiners,” he added — not all that helpfully in the opinion of the man he is trying to help win the White House.

“I strongly disagree,” McCain told reporters in Michigan, a state with an unemployment rate of 8.5 percent in May. “Phil Gramm does not speak for me. I speak for me.”

McCain’s the one discomforted this time.

But Obama’s known the same feeling. An unpaid adviser quickly became an unpaid former adviser this spring after calling Hillary Rodham Clinton a monster.

Not that Clinton escaped this type of embarrassment, either, in her bid for the White House. One of her national co-chairman once opined that Republicans would be looking for information on Obama’s admitted youthful drug use, a comment that caused a candidate-to-candidate apology.

The circumstances in these episodes vary, but often follow a predictable arc.

For starters, the surrogate or supporter usually serves a political purpose, which explains their presence within the campaign. Gramm, for example, is well-known for his conservative economic beliefs, and can presumably help McCain strengthen his ties to advocates of tax cuts who might otherwise view the presidential contender with suspicion.

In many cases, the person who instigates the controversy follows up with a claim of being quoted out of context. Or misunderstood. Or speaking off the record. None of these constitutes a denial, though, which would be an invitation to further difficulty in an Internet era.

An apology may be forthcoming, although Gramm has yet to make one. Sometimes there is a parting of the ways.

With or without an apology, the candidate makes clear his disagreement, as McCain did, and hopes the controversy fades.

Yet often, and understandably, a rival campaign seizes on the incident in hopes of gaining a political advantage.

Obama did in the current case. “Let’s be clear,” he told an audience in Virginia as McCain struggled to escape the fallout of Gramm’s remarks. “This economic downturn is not in your head.”

McCain’s had some practice at this sort of thing.

Not long ago, he rejected an endorsement from Texas pastor John Hagee after an audio recording made in the late 1990s surfaced in which the preacher suggested God sent Adolf Hitler to help Jews reach the promised land. “Crazy and unacceptable,” McCain said of his erstwhile endorser. Hagee quickly said the parting was “best for both of us and the country.”

Or at least for McCain’s campaign.

Clinton went down the same path in the case of Billy Shaheen, a prominent New Hampshire Democrat and national co-chairman who said last winter that if Obama won the nomination, Republicans would work hard to uncover unsavory aspects of his youth.

“It’ll be, ‘When was the last time? Did you ever give drugs to anyone? Did you sell them to anyone?’” said Shaheen, whose wife, Jeanne, is a former New Hampshire governor and is running for the U.S. Senate this year.

A round of apologies ensued, one from Shaheen and another from Clinton to Obama.

“As soon as I found out that one of my supporters and co-chairs in New Hampshire made a statement, asked a series of questions, I made it clear it was not authorized, it was in no way condoned, I didn’t know about it and he stepped down,” she said.

Obama’s moment came when Samantha Power offered an unvarnished opinion of Clinton in a newspaper interview. “She’s a monster — that is off the record — she is stooping to anything,” was the quote.

An apology soon followed in a statement in which Power called her own remarks inexcusable and contradictory to her admiration for Clinton.

By then, Obama had already called to bid his adviser good riddance.

And Clinton’s campaign followed up with an e-mail to supporters informing then of what had happened and seeking campaign donations “to show that there is a price to this kind of attack politics.”

Of course, there are variations on the theme.

In the last few days, the Rev. Jesse Jackson mused in front of an open microphone about wanting to emasculate Obama, whom he said sometimes appears to be talking down to black audiences.

A novel idea, perhaps, of expressing support for a presidential candidate.

This time, it appeared the damage was done to the supporter, rather than the candidate.

Obama accepted an apology from Jackson.

And what did Jackson really mean?

“My support for Senator Obama’s campaign is wide, deep and unequivocal.”

Source — Yahoo!

(CNN) — Sen. Hillary Clinton rode the momentum of her
Pennsylvania win into Indiana on Wednesday, with her campaign saying it
is on pace to raise $10 million in 24 hours.

Clinton reported raising $20 million in all of March, according to
campaign finance reports filed last weekend. Sen. Barack Obama raised
more than twice as much last month, taking in $41 million for his
campaign.

Obama’s camp touted a big boost for his campaign Wednesday: endorsements from 49 John Edwards supporters.

Edwards, a former North Carolina senator who dropped out of the
Democratic presidential race in January, has yet to endorse a candidate.

Indiana and North Carolina hold primaries May 6, the next date on the
primary calendar in what has become a protracted and, at times,
bruising fight for the Democratic nomination. Obama is leading in North
Carolina, and it’s a tight race in Indiana, according to recent polls.

Both Democratic candidates picked up superdelegates Wednesday, with
Obama getting the support of Oklahoma Gov. Brad Henry and Clinton
receiving a nod from Tennessee Rep. John Tanner.

Clinton and Obama both planned to stump in Indiana on Wednesday, following Clinton’s decisive win in Pennsylvania. She beat Obama by 10 points.

With the win, Clinton will pick up 81 of Pennsylvania’s 158 delegates,
and Obama won 69, CNN estimates. Eight delegates have yet to be
allocated.

The New York senator said Wednesday that her much-needed victory raises fresh questions about Obama’s electability.

Obama downplayed Clinton’s win, saying “it’s important for people to keep things in perspective.”

“We have won the white-, blue-collar vote in a whole bunch of states
… and if we had a demographic problem in Pennsylvania, it was that
it’s an older state than a lot of states, and it is true that Sen.
Clinton has some strong support among voters over 60,” he said on
Roland Martin’s radio show.

Clinton argued that the “tide is turning” as a result of her Tuesday victory.

“I won that double-digit victory that everybody on TV said I had to
win, and the voters of Pennsylvania clearly made their views known,
that they think I would be the best president and the better candidate
to go against Sen. McCain,” referring to the presumptive Republican
candidate, John McCain of Arizona.

“Clearly, [Obama] outspent me again in Pennsylvania, 3 to 1, and we
roared back with a tremendous grass-roots campaign and millions of
people turning out to vote and favoring me by a big margin. … The
fair question is, if you can’t win the states we have to win in the
fall, maybe that says something about your general-election appeal,”
she said.

Clinton has scored wins in the large states of California, New York,
Ohio, Texas and Pennsylvania as well as in the Florida primary, which
violated Democratic party rules because it was held at the end of
January.

Obama, however, has won more state primaries and caucuses than Clinton
and leads her in the overall delegate count as well as the popular
vote, despite her win Tuesday night. Obama leads Clinton 1,719 to
1,586, CNN estimates.

Neither candidate can capture the 2,025 delegates needed to secure the
Democratic nomination with wins in the remaining Democratic contests,
meaning the party’s superdelegates will probably decide who gets the
Democratic nomination.

Clinton and her backers have argued that the superdelegates should vote
for her over Obama, despite his lead in the delegate count and the
popular vote, because she is the more electable candidate in a general
election.

Clinton won Tuesday by holding on to the core group of voters who have
fueled her previous victories. She won a majority of female voters,
voters over the age of 45 and white voters.

And, in a troubling sign for the Obama camp, only 50 percent of
Pennsylvania voters who picked Clinton said they would vote for Obama
if he was the Democratic nominee, but 26 percent said they would vote
for McCain.

Nineteen percent of Clinton’s Pennsylvania supporters said they would
not vote in the fall if she was not the Democratic nominee.

Obama’s inability to cut into Clinton’s support among those groups may
raise some concerns on whether he could win those groups if he became
the Democrats’ nominee.

Speaking to supporters in Evansville, Indiana, on Tuesday night, Obama
dismissed questions about his ability to cross racial, gender and
generational boundaries.

“We can continue to slice and dice this country … or this time, we
can build on the movement we started in this campaign, a movement
that’s united Democrats, independents, Republicans, young, old, rich,
poor, white, black, Hispanic, Asian, Native American, gay, straight,”
he said. “Because one thing I know, from traveling 46 states this
campaign season, is that we are not as divided as our politics suggest.”

“Now, it’s up to you, Indiana. … You can decide whether we’re going
to travel the same worn path or whether we will chart a new course that
offers real hope for the future,” the Illinois Democrat said.

Source — CNN