Reality Check: Helping Small Businesses
This story was written by Wyatt Andrews.
As both candidates try to win over the working middle class, they're both claiming to have the plan that creates new jobs -- and does so right away.
Senator Barack Obama often says that "we need an immediate rescue plan for the middle class." Senator John McCain has laid claim to be the candidate who most helps small business.
McCain's appeal to Joe the Plumber rests on a claim he will cut taxes, including business taxes and in the process create new jobs.
"We will cut business taxes to help create jobs, and keep American businesses in America," he said this week.
The fact is none of McCain's tax plans help Joe the Plumber right away and his main tax pledge changes nothing at all.
Here's why:
McCain's claim that his tax cut is the "real thing" is based on his pledge to keep all of the Bush tax cuts. Fine, but those are on the books and part of the law for the next two years anyway. Nothing changes here if McCain gets elected, and no extra money goes to Joe.
How about those "business taxes" McCain says he will cut. This is verbal sleight of hand.
McCain is indeed proposing a corporate tax cut, in fact a bold one: 35% down to 25% phased in over five years. But almost no small businesses file taxes as corporations.
In other words, experts tell CBS News, Joe the Plumber, small businessman, isn't getting these business tax cuts either, because they are corporate tax cuts.
"There would be no direct benefit for small businesses because most small businesses don't pay corporate taxes," according to tax policy expert Martin Sullivan.
As for Obama, he claims that he can create new jobs by giving employers a $3000 tax credit for every new worker they hire. "I've proposed a new American jobs tax credit for each new employee that companies hire here in the United States over the next two years," he says.
That proposal was tested in the Carter Administration and was not a great success at creating new jobs. According to Sullivan, it won't work this time either, because of the slowdown in growth.
"$3000 is a small marginal incentive in an employer's hiring decision," he said. "It's a benefit on the margin, it doesn't hurt but it is unlikely to create a major stimulus for employment," said Sullivan.
In fairness to both candidates, they both propose varying cuts and/or elimination of capital gains taxes for business, and in some cases this would help small business owners. Most neutral economists will tell you capital gains tax cuts, viewed over the long term, do tend to stimulate jobs, and while they are a huge hit to the deficit, capital gains cuts are arguably good investments. Give both candidates credit here.
Similarly, both candidates promise to ramp up the energy economy and create millions of new jobs in the sectors of renewable and nuclear power. But again, these are long term investments. Neither candidate, based on their public claims, has a truly persuasive plan for the immediate job relief needed in the economy.
By Wyatt Andrews
