Wednesday, October 15, 2008

Obama's plan for small business and freelance taxes

Watching the third and final presidential debate tonight, I noticed a lot was made of the taxes freelancers and small businesses would face under Obama versus McCain. Since I am a freelancer and a sole proprietor, as are most of my readers, I thought some blog commentary would be appropriate.

Senator McCain argued that under Obama's tax plan, "Joe the plumber," a lowly small business owner, would be paying more in taxes than he could afford. McCain didn't seem to understand Obama's point that since Joe's plumbing business was making well over $250,000 a year, it wasn't really a small business, and should be able to easily afford a higher tax rate.

I found some information about small businesses on The Caucus, a political blog on the New York Times' website. The blog post, which analyzes some of the errors both candidates made, supports Obama's claims about how his tax plan would affect small businesses in the United States.

According to figures compiled by the Small Business Administration, there are fewer than six million small businesses that actually have payrolls. The rest are so-called "non-employer" firms which report income from hobbies or freelance work done by their registered owners, earning as little as $1,000 a year.

Of these, according to a calculation by the independent, non-partisan Tax Policy Center, fewer than 700,000 taxpayers would have to pay higher taxes under Mr. Obama’s plan. But even some of these are not really small business owners in the traditional sense. Instead, they include lawyers, accountants and investors in real estate, all of them with income over $250,000 a year.

So are there "millions more like Joe the plumber," as Mr. McCain contended? Probably not. Mr Obama may well have been correct when he stated that "98 percent of small businesses make less than $250,000."

I definitely don't think it's fair that big companies and corporations should get extraordinary tax breaks (which McCain supports) while I am held accountable for every penny — so as a freelancer and a sole proprietor (among other things), I definitely support Obama.


Lori said...

Totally agree, Katharine. I've heard my Republican sister go on and on for years (though not recently, interestingly enough) about how George was the MAN because he was looking out for the small business owners. Uh, I don't know about you, but I have issues with those tax forms every single year. Last year I used Turbo Tax and guess what? Yep. One more "love letter" from the IRS adjusting my totals. How is that looking out for the small business owner?

I think the question Joe the Plumber posed was a good one. I think if he'd purchase that business, he'd see tax breaks on the purchase price (deduct the loan interest and any immediate losses, etc). Even if it's worth more than $250K, that doesn't mean he's earned that. It means he's acquired a business with that earning potential. Yet the McCain camp is jumping all over that saying Joe will lose his shirt. Even I, an admitted math moron, can figure this one out! LOL

Katharine Swan said...


You have a good point about Joe the Plumber. They didn't really address the difference between the value or cost of a business and the income it generates per year -- at least, I don't remember anyone explaining it as clearly as you just did.

Perhaps you've found your calling -- political speeches and debate coaching! :o)


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