McCain's Small-Business Bunk

And he repeated it in the first of a planned series of radio addresses July 12:

McCain, July 12: If you are one of the 23 million small-business owners who files as an individual rate payer, watch out – because as your business grows, my opponent proposes to raise your taxes.

But repeating a falsehood doesn't make it true. McCain's 23 million claim is a bogus figure.

Outdated, Inflated, Inapplicable
To justify the 23 million figure, McCain spokesman Brian Rogers referred us to a press release by the U.S. Chamber of Commerce, which refers to "23 million small business owners" without citing a source. That is actually an outdated count of all the businesses in the United States, produced by the U.S. Census for 2002, when the Economic Census counted a total of 23,343,821 business firms of all sizes. Of those, 16,845 firms employed 500 persons or more, which still leaves just over 23.3 million classified as "small" by the widely accepted definition that we will use here.

That figure is six years out of date. The U.S. Small Business Administration Office of Advocacyestimates the total number of "small" firms with fewer than 500 workers reached 26.8 million in 2006. That's the most recent estimate. But it is also inflated. Since the total U.S. population was just under 300 million in 2006, it would mean that one in every 11 Americans – men, women and children – is a "small-business owner."

It turns out, SBA's estimate includes more than 20 million "nonemployer" firms, an unknown number of them sideline or hobby businesses run by persons who actually make their living some other way. Census and SBA count as a "small business" anyone who reported as little as $1,000 of business receipts. By that very broad definition, John McCain himself is a "small-business owner," because his tax return shows Schedule C income from book royalties. For that matter, Barack Obama would also be a small-business owner, by virtue of his book income. As would President Bush and Vice President Cheney, as we pointed out in 2004. Of the 26.8 million that SBA counts as "small businesses," fewer than 6 million are actually "employer firms" with any payroll.

From this, we must conclude that to arrive at his 23 million figure, McCain is counting mostly "business owners" with no workers, including those who simply report small amounts of income from sideline or freelance work. McCain is arguing that Obama's tax increase would "destroy jobs," but he's counting mostly firms that don't produce any.

That in itself is seriously misleading. If McCain wants to focus on the effects of Obama's plan on employment, he would do better to confine his count to employers – the just under 6 million firms that actually have workers. And even that figure wouldn't be applicable because Obama's tax increase wouldn't fall on all employers, only on those in the top two income tax brackets.

McCain Campaign's Statement
1. These small businesses are subject to Sen. Obama's pay or play health care plan: The tax will either be in the form of health insurance to
workers or cash to the government.

2. Further, even giving Obama the benefit of the doubt, if they make
over $250,000 and file as individuals or have capital gain or dividends, their taxes go up, as Obama has promised.