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October 12, 2008

And Then There Are Statistics (Kat-Mo)

The fact checkers need fact checkers. Everywhere I looked, I kept seeing alleged "fact checkers" trying to tell the American people that, yes, Obama wants to raise taxes, but only on a very small part of Americans. A fraction, their story goes, and the rest of you will get a tax break.

All good, right?

Wrong, wrong, wrong!

You have to wonder who writes these pieces. Obviously not the deep end of the economic genius pool.

Let's start with the idea that just maybe their calculation of "only" 662,000 "small businesses" make over $250,000/year is correct. I'll even leave aside, just for the moment, the very lame attempts to parse the numbers and discredit "individuals" filing as "S" corporations, like doctors, lawyers, accountants, consultants, etc as some how not befitting the title of "small business" because they don't look like Ma and Pa's mercantile with a store front and 2.5 employees. Odd that, considering that half of the 23 million "small businesses" are "home based".

What is completely missing from these "statistics" are the number of employees these businesses employ. Why is that important in the whole "tax" question? Because, in most businesses, the largest expenditure is "labor". When profits go down due to rising inflation, rising energy and materials costs, decreased sales and then gets compounded by increased taxes, guess where companies tend to look first to reduce costs?

Look in the's you.

While a small business making just $250k might "only" pay an additional $9k in taxes, after Obama's 7% increase off the top end of the progressive tax scale, what isn't happening with that $9k? No build outs and no new leased vehicles to deliver more products or services, thus increasing business and the possibility to employ more people. Oh, and no new, increased revenue to pay taxes on to the government, but we are talking about you, the people, the probable and potential employees of these businesses.

Annual wage raises may be smaller or non-existent (but don't worry, Obama's plan calls for a wage increase so you'll get it in the back end - never mind the probability that this will just be another reason not to hire more people or not keep everyone currently on the payroll). Add or increase benefits for employees like health insurance? Not this year. Maybe not next year, either.

Oh, wait. Obama's plan is to give these businesses $500 to $1000 tax credit to pay for health insurance premiums. For 4 employees that would be between $2000 and $4000 or 25% to 45% of the amount of additional taxes paid to the government under Obama's tax plan.

Why wouldn't Obama's plan just let these businesses keep the money in the first place to pay for it themselves? Well, honestly, because, even though these tax breaks will be available, there are exceptions to the laws requiring health care coverage. Companies with 10 or less employees don't have to offer health insurance by law and, under Obama's estimation, probably will continue not to.

Further, those wimpy tax breaks won't even begin to cover the premiums for a basic plan for four employees since smaller companies have less bargaining power with insurance companies. These businesses would still be paying a chunk out of their own pockets on top of the added taxes. If it comes down to providing benefits or surviving an economic down turn, businesses are going to pick "surviving" over providing extra benefits every time.

Obama is expecting that many of these companies simply won't go out and get health insurance for their employees so they won't be taking advantage of those tax breaks. Meaning, with the tax hike and minimal tax breaks, the government will be getting and keeping a lot more money regardless of his attempts to fool people with this shell game of taking and giving.

It's not going to pay down our deficit, either. Particularly, when Obama explicitly says he's going to spend more money ASAP. A trillion more dollars. Based on the government's history of taxes, spending and deficits, who really believes we won't see even deeper deficits despite this alleged "fix" represented by increased taxes? These government deficits won't just be owed by "the rich people" or "a small fraction" of small businesses or individuals making over $250,000, either. They will be owed by all of us.

Back to the employees. What difference can $9k make in actual number of employees in a small business? How about the nineteen year old college student working part time to supplement college funds? Mom working outside the home to supplement family income to pay for that car or just put groceries on the table after rising energy prices have hammered the family budget? Retired elderly working to supplement their social security which is very much outside of any real living cost? In Obama's plan, it will be, "Buh-bye. Adios. The government needs this money more than you do."

Small Business making over $1 million with 50 employees or more? They are going to pay upwards of $70k/year in additional taxes. How many employees do they lose? Over and above the economic retraction with accompanying possible loss of jobs? At least two lost per company and none added.

That "none added" is just as important as any losses. Small businesses account for 80-90% of jobs created every year. If small businesses don't grow, jobs don't grow.

We can pull numbers out of thin air, too. Let's just say that half of those 662,000 businesses lay off 2 employees each. That is, of course, over half a million people unemployed, not paying income tax to the government, but taking money out of the government through unemployment or other benefits. What is the actual loss and gain there? The government is not going to be creating jobs with the money that it takes.

And, folks, that is based on cheap. lazy, back of the cocktail napkin math which is at least as good as the math these "fact checkers" used. Who knew that half a million people were so unimportant? Who knows these half a million people?

You do. You might even be one of them.

Seriously, though, the whole point is that statistics say what we want them to say and statistics definitely say what we want them to say when we leave out the parts of the statistics that undercut an argument. What is the worst aspect is that people are misled by these little "fact checks" because they still listen or read news agencies who are lazy enough just to quote a Democrat think tank without actually going the distance to establish the true economic impact to the average American.

The Average American is supposed to be fooled by the magical slight of hand that has them looking at the taxes on their check stubs and 1040's while their jobs disappear and small businesses, the backbone of American economic growth, retract.

But, don't worry, it's only 662,000 businesses that will be impacted along with those dastardly "wealthy" people making over $250,000 year.

Not you. Not me. Somebody else.

That's what you are supposed to think anyway.

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posted by xgenghisx at 02:30 PM

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