Yesterday, while pushing his new economic plan — Jobs for America — Sen. John McCain (R-AZ) argued that repealing President Bush’s tax cuts would raise taxes for the “23 million small business owners” who file their tax returns as individuals and strongly insisted that “every time we cut capital gains taxes there has been in an increase in revenues.”
The first assertion was made in a speech before the League of United Latin American Citizens:
Keeping individual rates low isn’t intended as a favor to wealthy Americans. 23 million small business owners pay those rates, and taking more money from them deprives them of the capital they need to invest and grow and hire. If you believe you should pay more taxes, I am the wrong candidate for you.
The second came out during an interview on CNN:
You can’t seem to get over the fact that it’s spending that’s out of control. And you restrain spending and also you can’t get over the fact that historically when you raise people’s taxes, revenue goes down. Every time we cut capital gains taxes, there has been an increase in revenues.
McCain is wrong on both counts.
Regarding the tax cuts, the McCain campaign’s number assumes that every small business that files as an individual makes over $250,000 annually, which is the threshold at which the tax hikes would actually kick in. But “according to the Tax Policy Center, only 1.4 percent of people defined by the Treasury as small-business owners are in the top two tax brackets,” and would be subject to higher taxes.
Additionally, Time’s Jay Newton-Small found that 94.5 percent of self-employed small business owners actually reported an income of below $100,000, so “the total number of small businesses effected by a tax hike on those who net more than $250,000 a year remains a few hundred thousand – nowhere near the 23 million” McCain suggests.
As far as capital gains are concerned, The Center on Budget and Policy Priorities clearly notes that “cutting capital gains rates reduces revenues over the long run,” and “middle-income families derive only a miniscule benefit from the 2003 cuts in capital gains and dividends.” Just 2.5 percent of capital gains were collected by households making less than $50,000 in 2005, according to the Tax Policy Center, while 59 percent went to families earning more than $1 million.
This continues an already bad week for McCain’s economic policies. On Monday, he paraded out a list of 300 economists who supposedly support his economic plan, but it turns out that some of them don’t actually support his whole agenda, and are, in fact, critical of many of his proposals.
But what else should we expect from the man who admitted that “the issue of economics is not something I’ve understood as well as I should.”