McCain's Tech Policy Part Two
"Meg Whitman, [the CEO of eBay]. Meg Whitman, 12 years ago, there were five employees. Today, they're 1.5 million people that make a living off eBay in America, in the world. It's one of these great American success stories."
Above is John McCain's answer to Pastor Rick Warren, in part, concerning who he'd take advice from. So let's match Ms.Whitman's former company -- she is now the former CEO of eBay and I'm eager to say she is a fine business leader -- against John McCain's tech policy.
Under McCain's plan, if eBay were to fire a thousand engineers doing R&D, it would still get a tax credit of 10% of wages of the remaining engineers doing R&D. In other words, eBay would be paid cash even while it was downsizing its work force.
Meanwhile, if a company invested a million dollars buying solar panels or wind turbines, it would get nothing from the McCain tech plan. If a company purchased a million dollars of equipment to experiment in making more efficient solar panels or wind turbines, it would get nothing to encourage that purchase. The reason? McCain's plan pays cash to employers in proportion to wages,not asset acquisition or investment, and also doesn't require that the wages reflect new investment or new hires. I've scoured the Tech Plan and can't see any other reading. If this is wrong, please help me to a better understanding.
Finally, the 1.5 million people "making a living" by selling through eBay aren't employees, so their numbers are not increased by Mccain's tech plan, and eBay gets nothing from the McCain plan if it tries to encourage that sort of job creation and value creation.
Why is the Mccain plan a good plan?
Looking at McCain's website, briefly, it appears his R&D wages tax credit isn't intended to increase employment but rather to reward R&D investment.
And wouldn't his plan to "expense" (rather than amortize) equipment and technology investments benefit businesses investing in solar panels and wind turbines?
Note: McCain would happily repeal the corporate income tax; and he can quietly reach that goal by granting tax deductions to business for everything under the sun.
August 18, 2008 8:44 PM | Reply | Permalink
I have a problem with just one word in the McCain plan for small business; it would be the word "small." I have nothing against small business, but it's pretty clear that the McCain plan has nothing for small businesses.
His website's first helping hand involves opening up ANWAR and offshore drilling. I've had many conversations with enterprising entrepeneurs and I somehow don't recall one ever asking about ANWAR. But hey, if the petroleum lobby can viral market with Joe American, why not get a dig on McCain's small business plan--it's about as real.
Next, how does a small tech start-up enjoy an R&D tax credit when they run at a loss for three years? And why would they expense their equipment when capitalizing allows them to limit their annual loses? This is counter-intuitive when you consider that tech consuming industries are looking under every rock for hours that they can capitalize(SOP-98).
John McCain's plan seems to be suggesting that expensing is a viable option for small businesses, when in practice small technology firms are more keen to capitalize tech kit and time to reduce annual loses.
Big business, however, loves R&D and Expensing because they have the opposite problem of a start-up; rather than losses, they have profits. Nothing chips away at corporate tax liability than lower profits. Great taste; less filling.
What exactly is John McCain talking about? Perhaps the only thing I agree with him on is that he is very light on understanding the economy (oh, and always wear at least an SPF of 35).
August 18, 2008 10:06 PM | Reply | Permalink
"small business" is a very deceptive term, to the masses it conjurs up some mom and pop grocery store, some family owned gas station, or some guy who's a plumber or an electrician, etc. You know, the guy down the street who owns a landscaping business.
Small business in one case is defined by the Federal Government as a company with less than 500 employees.
Can small business be a law practice with 50 lawyers with billings in the millions? I go to an eye doctor who is also a surgeon. He has at least two other eye doctors working for him now, their billings must be astronomical. Is that a small business?
Another doctor in our town built a building a few years ago, and now has a number of doctors working for him providing all type of services. Small business?
The term "small business" can be quite misleading when one wishes to mislead the public about tax cuts for "small business."
August 19, 2008 10:17 AM | Reply | Permalink
Today, they're 1.5 million people that make a living off eBay in America, in the world. It's one of these great American success stories.
McCain apparently believes that the American economy can be fueled by having us selling our junk to each other. Here's another great idea, John. We could really get the wheels spinning if everyone just sent out the laundry to a neighbor. Imagine the economic boost!
August 19, 2008 10:34 AM | Reply | Permalink
Tankard,
a truly ingenious idea! :)
McCain offers overly simplistic, mindless banalities for all our ills.
August 19, 2008 7:15 PM | Reply | Permalink
The real story with “small business” is how wealthy people (entrepreneurs!) manipulate the system. (Who would have guessed?) Many health and safety requirements apply only to businesses with over “x” employees. Let’s say x=50. I know a fellow who owned a business, but kept the books of two portions of the business separately. Therefore, on paper—and for regulatory purposes, he owned two small businesses. Never mind that they operated in the same facility. Employees were paid out of one or the other businesses – or sometimes both.
I know of another family who owned numerous fast-food restaurants. Rather than reporting this as a single business, the family patriarch divided up the stores into groups. Each group was considered a “small business.” Again, in each small business, employees were not protected as they would have been in a “large” company that was regulated. To add insult to injury, the groups of small businesses were S corporations, meaning that the businesses were owned by family members. The businesses paid no corporate taxes; instead, the profits were divided among the family members and reported—and taxed—as business income of individuals.
August 20, 2008 12:00 AM | Reply | Permalink