-- This week, I intended to write my election-year evaluation of the presidential candidates and small-business issues. When, wham! Suddenly a guy named "Joe the Plumber" — a guy from Toledo, Ohio, who hopes to buy his boss's business one day — entered the arena.
Joe took center stage during the final presidential debate between John McCain and Barack Obama to discuss how small businesses will fare under the policies of each, and the McCain campaign repeatedly refers to "Joe the Plumber" in stump speeches.
Please — please! — don't have Joe or his boss represent small business. You see, it turns out Joe isn't licensed in Ohio, and it appears his boss is violating the law by employing Joe. Joe has a lien against him for failure to pay income tax. Oh, and by the way, the company he works for has an "Unsatisfactory" rating from the Toledo Better Business Bureau. (Disclosure: my company, The Planning Shop, publishes the Better Business Bureau books). Hey, we've all run up against this kind of competitor — the guy across town who hires unlicensed or unqualified workers, then we have to explain to a customer or prospect why our prices are higher.
Most small-business people — the backbone of this economy obey the law, pay our taxes, create good jobs and compete fairly.
So, move over, Joe. And let those of us who run honest small businesses hear what the candidates are going to do for us. I've taken the issues most of us care about, reviewed the candidates' official positions, what they've said in speeches, and have come up with a very abbreviated analysis below:
• McCain:Lower corporate taxes from 35% to 25% — or taxes on companies organized as "C" corporations. Taxes on "S" corporations or limited liability companies, or LLCs, would remain the same, since the taxes are "passed through" to owners' returns. Phase out the Alternative Minimum Tax. Ban Internet taxes. Allow first-year "expensing" of large purchases. Make permanent a 10% Research & Development tax credit.
•Obama:Raise taxes on the top two income brackets — those with profits more than $250,000 a year per family or $200,000 a year individual. Give $1,000 per couple/$500 per individual tax credit to those working and making less than $150,000 a year (including the self-employed).
Analysis:Numbers are on "taxable income" — or profits minus all expenses and deductions. If you have more than $250,000 in profits, you'll pay higher taxes under Obama; if you make less than $150,000 after expenses and deductions, you'll pay lower taxes under Obama than McCain. Since McCain's tax cut only applies to corporate taxes, it's possible that Exxon will have a lower tax rate than a gas station owner who owns his business as an LLC.
•McCain:$5,000 tax credit per family — $2,500 per individual — for health insurance premiums. Allow you to buy insurance across state lines, with the intent that would result in lower cost options. Pays for this by making health care benefits taxable.
•Obama:Employer tax credit of up to 50% for employees' health care premiums. Reimburse companies for employees' catastrophic health care costs to insulate them against insurance premium cost spikes. Provide small businesses with access to a national exchange of low cost health care plans to reduce medical insurance premiums.
Analysis:Neither candidate's plan does enough to contain costs. Obama's tax credit goes to the small business; McCain's to the employee or medical insurance company. My employees and myself, with health insurance costing more than $2,500 per person per year, would pay higher taxes under McCain because we'd be taxed on this currently untaxed benefit.
Access to capital:
•McCain:Would maintain the current capital gains tax rates, lowered under President Bush. Would lower top capital gains rate to 7.5% for two years.
•Obama:Would eliminate all capital gains on small and start-up businesses but raise other capital gains rates. Would provide 20% tax credit on up to $50,000 investment in small owner-operated rural businesses.
Analysis:If you sold your business in the next two years — as a stock sale — McCain's lowered capital gains tax would benefit you. I like incentives for investing in small businesses over buying what I call "used stock" — or the stuff traded in the stock market. Obama's plan apparently does that — although the details are missing. Obama's rural investment credit should help small farmers. President Bush increased fees and reduced bank guarantees for SBA 7(a) loans — as a result, this year SBA loans have fallen by 50%. These are the loans that when you as a small-business person walk into a bank to help finance expansion of your business and create new jobs, the banker is most likely going to offer you. I want to see a permanent restoration of the SBA loan guarantees and reduced loan fees.
•McCain:Build 45 new nuclear power plants by 2030, creating 700,000 new jobs.
•Obama:Give businesses $3,000 tax credit for each domestic job created in 2009 and 2010; invest $250 million in a network of public/private business incubators; invest $150 billion on alternative energy projects to create new jobs.
Analysis:I've been calling for a tax credit for businesses that create new jobs, but will $3,000 be enough to encourage a small company to hire new employees or only a benefit for large corporations?
Rhonda Abrams is president of The Planning Shop, publisher of books for entrepreneurs. Her newest book is Successful Marketing: Secrets & Strategies. Register for Rhonda's free business tips at www.PlanningShop.com. For an index of her columns, click here. Copyright Rhonda Abrams 2008.