October 21st, 2008
06:12 PM ET
14 years ago

Fact check: Would Obama hike taxes on small businesses that employ 16 million?

[cnn-photo-caption image= http://i2.cdn.turner.com/cnn/2008/images/10/21/art.mac2pt1021.ap.jpg caption="Was Sen. McCain right about Sen. Obama and taxes? Get the facts!"]
The Statement: Speaking during a campaign stop Monday, Oct. 20 in Belton, Missouri, Republican presidential nominee Sen. John McCain criticized Democratic opponent Sen. Barack Obama's proposals on taxes. "The Obama tax increase would come at the worst possible time for America, and especially for small businesses like the one Joe dreams of owning," McCain said. "The small businesses Senator Obama would tax provide 16 million jobs in America."

Get the facts!

The Facts: McCain's criticism appears primarily aimed at Obama's personal income tax proposals - which he says would give tax cuts or leave taxes the same for individuals who make less than $200,000 or families that earn less than $250,000 - but increase them on people making more. Roughly 85 percent of small businesses are taxed at the owner's personal income tax rate, according to an editorial in the Wall Street Journal. Most of those businesses earn less than $250,000 a year.

The McCain campaign uses figures from a National Federation of Independent Business survey to back up its claim. The survey says 12 percent of business owners who employ between one and nine people earn more than $200,000 a year - as do 27 percent of those who employ 10-19 people and 50 percent of those who employ between 20 and 250 workers. Obama says $200,000 is the lowest income level at which an individual would see a tax increase under his plan.

But in assuming all of those business owners would see an increase, the McCain campaign appears to suppose that all of the business owners making between $200,000 and $250,000 would file their taxes individually, not jointly with a spouse or other family member. And roughly 15 percent of small businesses aren't taxed based on the owner's personal income rate, as the Journal notes. Based on those facts, it's impossible to know exactly how many of those business owners would see a tax hike - but it surely would not be 100 percent.

The McCain campaign uses census figures to estimate how many people work for the businesses it says would be impacted - an effort McCain spokesman Brian Rogers acknowledges is "admittedly a rough estimate." The NFIB says the number of jobs small businesses create is "impossible to calculate," in part because some people only work at small businesses part-time while holding down full time jobs with a bigger employer.

The Verdict: False. McCain uses an overly broad interpretation of the NFIB survey's figures - applying Obama's tax plan to those figures in a way that is highly unlikely to match reality.

Filed under: Candidate Barack Obama • Fact Check • John McCain • Taxes
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