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Tilting at Windmills

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October 25, 2008

REDEFINING 'SMALL BUSINESS'.... The McCain campaign has a nasty habit of redefining words when the existing definition doesn't suit its purposes. This week, "small business" no longer means what most of us think it means.

This morning, John McCain talked about taxes in his latest weekly radio address, insisting that Obama's tax plan would risk "bankrupting small businesses." McCain didn't explain how he arrived at this conclusion, especially given the fact that Obama's plan actually offers all kinds of tax breaks to small businesses.

But it appears the problem is one of definitions. The McCain campaign taxes a comically expansive view of what constitutes a "small business."

Ever since John McCain discovered "Joe the Plumber," he has exalted "small business" owners -- inviting them to announce their professions on signs at rallies -- as the country's only virtuous economic movers.

But now McCain has begun to define the term upward, leaving no mogul or tycoon behind.

On Thursday in Sarasota, Governor Charlie Crist introduced J. Robert Long, the CEO of Marine Concepts as a "small businessman." The man McCain dubbed "Bob the Boat Builder" spent, as Crist noted, most of his career at Wellcraft Marine, which reported revenues of $67 million last year, according to Yahoo! Finance.

Tonight in Colorado, Senator Lindsey Graham, a close friend of the McCains, described Cindy as "a great small businesswoman." Her "small" business -- Hensley & Co., a family-owned Anheuser-Busch distributor that is the third largest among the 800 in the country -- had revenues of nearly $200 million last year, according to Yahoo.

This does explain a few things. McCain's tax plan, for example, would offer ExxonMobil a total of $4 billion in new tax breaks. As McCain sees it, this is probably his way of helping a small business.

Steve Benen 8:35 AM Permalink | Trackbacks | Comments (27)

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Does anyone know how Obama defines "small business"? I can't find it on his issues page, but when he met Joe the Plumber, he asked if the company did $250,000 in revenue. That would be the equivalent of building one McMansion. I find it hard to believe he would use revenue as the criterion.

Posted by: Danp on October 25, 2008 at 8:51 AM | PERMALINK

Our entire oil industry is run by small businesses. There are only a few of them. That means their numbers are small. Therefore they are small businesses.

Posted by: El Cid on October 25, 2008 at 8:51 AM | PERMALINK

In America small business is generally defined as being a business with fewer that 100 employees, although I have seen businesses with 200 employees claim they are small businesses. Of course that isn't what most people think when they hear the term "small business."

The $250,000 Obama talks about is not gross revenue, it is taxable income. Most businesses require millions in gross income to generate $250,000 in taxable income.

Posted by: Ron Byers on October 25, 2008 at 8:58 AM | PERMALINK

Ron Byers - Thanks. That makes a lot more sense. It also puts Joe the Plumber a lot further from his nightmare of being stifled by socialism.

Posted by: Danp on October 25, 2008 at 9:01 AM | PERMALINK

The McCain world view only "works" with such convoluted definitions, deception, illusion, and massive doses of cognitive dissonance.

Posted by: lou on October 25, 2008 at 9:04 AM | PERMALINK

McCain's tax plan, for example, would offer ExxonMobil a total of $4 billion in new tax breaks. As McCain sees it, this is probably his way of helping a small business.

He's just trying to help Rex the Driller.

Posted by: ogmb on October 25, 2008 at 9:06 AM | PERMALINK

I think that all "small businesses" should get a tax break so they can have their own private jet like Cindy, or at least a twin engine turboprop, its only fair.

Posted by: I'm John McCain and I approved this message. on October 25, 2008 at 9:18 AM | PERMALINK

... I have seen businesses with 200 employees claim they are small businesses.

IIRC, that is the Bureau of Labor Statistics definition of a small business. However, I agree that that is not what most people consider "small."

Posted by: AK Liberal on October 25, 2008 at 9:26 AM | PERMALINK

"I think that all "small businesses" should get a tax break so they can have their own private jet like Cindy, or at least a twin engine turboprop, its only fair."

Fact is that Congress has been pumping all kinds of tax breaks to small businesses for several years now including quick writeoffs on depreciations for equipment purchases, etc. The loopholes available to reduce the amount of taxable income is endless. And it is very easy to conjoin personal use of business income with legitimate business expenses. Auditing of much of this has been very lax under the Bush administration.

Posted by: lou on October 25, 2008 at 9:32 AM | PERMALINK

@ Lou Nevermind It might be a tad expensive

http://www.ehow.com/how_110761_buy-personal-jet.html

Determine the size and flying range you'll need. Light jets ($3 million to $8 million) can take 5 to 8 passengers roughly 2,000 miles (3,219 km); midsize executive jets ($9 million to $16 million) can take up to 9 passengers from 2,000 to 3,000 miles (3,219 to 4,828 km); and large executive jets ($17 million to $45 million) can carry 12 passengers more than 4,000 miles (6,437 km). The more popular makers and models are: Learjet, Boeing Business Jet, Cessna, Gulfstream and Dassault Falcon.

Posted by: John R on October 25, 2008 at 9:41 AM | PERMALINK

Yes, depending on industry the number of employees to be considered a "small business" varies. At least from what I understand from the SBA. Anyway, I live in Northern Virginia, there's a McCain add with some guy talking about NOT increasing the size of his business becuase of Obama. Anyone seen this one?

Posted by: r_m on October 25, 2008 at 9:50 AM | PERMALINK

REPUGS are good at three things...HYPOCRISY, saying ANYTHING over and over until people accept it as truth, and redefining words to fit into the LIES they tell...oh, and for good measure let's throw in PROJECTION a word that should be on their banners...

Posted by: Dancer on October 25, 2008 at 10:32 AM | PERMALINK

Republicans are always quick to play the socialism card often citing taxes (and tax distribution) as the reason not to vote democrat.

I'm sorry to have to tell repubs this, but cutting business tax a few percentage points isn't going to help businesses who are(or will be) seeing their revenues slashed. Lower business taxes can help stimulate small business growth in normal times. These are NOT normal times.

I'm not sure how we'll get out of this economic mess, but keeping taxes...and interest rates.... and regulation too low for too long sure the hell helped us get into it.

Posted by: Jim on October 25, 2008 at 10:38 AM | PERMALINK

This week, "small business" no longer means what most of us think it means.

Inigo Montoya should have his own blog.

Posted by: inkadu on October 25, 2008 at 10:42 AM | PERMALINK

"The McCain campaign has a nasty habit of redefining words when the existing definition doesn't suit its purposes."

C'mon. You gotta be kidding. Republicans would never do that

Posted by: Paul in NC on October 25, 2008 at 10:57 AM | PERMALINK

Rather than being uncritical or inaccurate in addressing this issue, as r_m notes the SBA defines small business according to industry and either by revenue or number of employees. The $ could be as much as $50,000,000 and employees as many as 1500 according to industy and sector. While McCain's disingenuous more often than not, it's also specious to suggest he considers XOM to be a small business.

Posted by: Travis on October 25, 2008 at 11:17 AM | PERMALINK

Yesterday, I saw a pickup truck with a handmade bumper sticker that said, "I'm Joe the Plumber."

Posted by: pol on October 25, 2008 at 11:39 AM | PERMALINK

The Small Business Administration defines a "small business" differently, depending on the industry (a table is here: http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?c=ecfr&sid=b6e780955530049be4cc0d0a0e391115&rgn=div5&view=text&node=13:1.0.1.1.15&idno=13#13:1.0.1.1.15.1.264.9).

In general, a small business in agriculture has annual revenues (not net income) of $750,000 or less. In manufacturing, a small business generally employs 500 (sometimes 1,000) workers or less (which would mean, generally something like $15 million to $150 million or less in, again, revenues (not net income).

The limit in boat building, which I would assume is Wellcraft Marine's classification, is 500 employees (maximum) to be considered a small business. That's $134,000 in revenues per worker, which is not implausible.

Depending on the industry, therefore, a firm with annual revenues of $67 million *might* make the cutoff.

Posted by: Donald A. Coffin on October 25, 2008 at 11:48 AM | PERMALINK

Well, didn't we already know that Cindy Lou ran a Mom w/Poppers?

Posted by: maya on October 25, 2008 at 11:49 AM | PERMALINK

"John McCain talked about taxes in his latest weekly radio address..."

Johnny has a weekly radio address? Who knew?

Posted by: Hedley Lamarr on October 25, 2008 at 12:17 PM | PERMALINK

Over at RedState, I saw some dude claiming that his "small business" was planning to get rid of several jobs that would shed $700k in payroll, as well as all sorts of other expenses to get ready for Obama's tax increases. And by his description he was cutting more than $1 million annually as if that's how much he thought Obama's tax increases would cost him, and saying that if this affected him, it must be hurting millions of other small businesses too.

And of course, all this was total bullshit. Defining "small business" isn't easy, but any company that can shed $700k in jobs and still stay in business ain't a small business. But his story didn't make sense for multiple reasons and it just sounded like the typical anti-Obama sob story we've been hearing since back when they were anti-Clinton sob stories, when he proposed raising taxes all those years ago, which was going to be the death of our economy. Even now, conservatives seem to have forgotten that Bill raised taxes before our economy went gangbusters.

That guy never did explain how much he thought Obama's tax cuts would cost him, even though that was the only question I asked.

Posted by: Doctor Biobrain on October 25, 2008 at 12:58 PM | PERMALINK

A brief comment on Dr. Biobrain's post, about the business owner claiming he was planning to cut $700,000 in "jobs" and around $1 million in total expenses. The good doctor said he didn't see how you could cut that much and remain in business.

Well, yeah, that could be a small business. Total compensation (including benefits, etc.) of $50 K per job, that's 14 jobs. Suppose you're at the high end of the SBA's small business definitions in construction (where the current upper limit for revenue is $33.5 million). That's a 3% cut in total expenses. I think a firm cutting 3% in total expenses could easily survive.

Now, you may not like how the SBA defines a small business. But a $33.5 million (in revenue) construction company is not very large.

On the other hand, I suspect that the owners of a small business at the upper limits of the SBA classifications are unlikely to see their taxes rise if Obama gets elected.

Posted by: Donald A. Coffin on October 25, 2008 at 1:54 PM | PERMALINK

Now, you may not like how the SBA defines a small business

The idea that a business making $33 million in total revenue is "small" is a bit of a stretch, though I suppose it does matter which industry it is. The IRS limit is $10 million averaged over the past three years, and even that's quite large. For many of my small business clients, making $1 million in revenues is considered a good year.

And of course, the biggest problem with that guy's story is that he thought that Obama's tax increase would cost him $1 million extra each year and so he'd have to cut employees and benefits in order to afford it. Yet if his profits were that large, he'd be able to afford the employees. That's the main flaw with the conservative attacks on Obama's plan: They assume that businesses that are struggling to stay open would have huge tax bills. They somehow fail to see how these things are related.

Posted by: Doctor Biobrain on October 25, 2008 at 2:38 PM | PERMALINK

Oh, come on. You can parse SBA statistics all you want, but the good doctor's implicit point still stands: anyone who is anticipatorily firing workers because Obama may raise his tax burden by 3% is an idiot, or at least a very poor businessman.

Most likely, though, this story comes from some stooge like Joe the Plumber, whose massive wealth will be confiscatorily taxed by President Obama only in his fevered imagination.

Posted by: brewmn on October 25, 2008 at 4:37 PM | PERMALINK

I think that politics is all about agendas and tending to the needs of certain groups. If you gross more than 250k a year, you might want to vote for McCain. If you don't make much money, you might as well vote for Obama. I think that everybody will see that no matter what, we will be moving towards a new currency. The Fed is printing cash like there is no tomorrow.

http://wordpress.com/tag/capital-west-advisors/

Posted by: aaron on October 27, 2008 at 1:35 AM | PERMALINK

You guys Need to go back to school and take some business courses. There are Actual definitions of what a "small business" is! And Yes Obama uses this tax case as leverage to get people to think he will help them. What if the 85% of what makes this country's economy move (small business) were to inherit more friction from the government limiting growth opportunity? Less folks would have jobs, less money would be spent, less trade would be accomplished, less funding would be available, and the list goes on! 250k of revenue is peanuts, and if your running a business with less than that, then your not doing a good job and you should go work for another small business that more efficient. After your expenses, you would probobally take home 25k! Seriously

Posted by: Jonathan on October 28, 2008 at 2:12 PM | PERMALINK

I own a small business with $1.3 million in revenue and around $300K in profit. My business is growing around 20% per year - we are doing good. What most don't realize is that almost all the taxable profit (~$300K) is used for purchasing the increase in inventory for the next year. This is not taxed deductable, inventory is taxed like profit. This prevents a business from hiding profit in inventory. BUT this means that the high tax we pay very much limiting our growth. I am not taking much at all home.

Posted by: Edwin on October 29, 2008 at 12:13 AM | PERMALINK




 

 

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