http://www.factcheck.org/elections-2008/mccains_small-business_bunk.html

How Many Would Actually Pay More?

McCain is right about one thing. Many small-business owners would indeed see their taxes go up if Obama is elected and raises the top income-tax rates. According to a survey from the National Federation of Independent Businesses, about eight out of 10 small-business owners responding to the poll report that they are organized legally in a way that would require them to pay taxes on their business income as individuals, rather than as a corporation. But since Obama’s plan wouldn’t affect those making less than $250,000 for couples, or about $200,000 for singles, we need to estimate how many would fall into those high-income categories.

Obama’s plan, according to his economic policy director Jason Furman, would return the top two federal income-tax rates to what they were before Bush lowered them. In addition, Obama would adjust the income-tax brackets to ensure that no married couple making under $250,000 or single filer making under $200,000 would pay the top rates.

The actual number of business owners who would be affected turns out to be well under a million, and the number of employers would be even less. Based on the number of taxpayers who now report any sort of business income on their returns, the Urban-Brookings Tax Policy Center projects that 663,608 taxpayers with business income, or business losses, will fall into the top two tax brackets in 2009, when any Obama tax changes would first take effect. Not all of those can properly be called “small-business owners,” however. Some are farmers. Many are lawyers, accountants or other professionals who get some of their income in the form of partnership distributions. Others may be passive investors in real-estate partnerships or similar investment arrangements and not really persons who own and manage a business.

It is also not clear how many who report business income actually employ any workers. In 2004, the Tax Policy Center found that hundreds of thousands of individual taxpayers who had business income from partnerships or subchapter-S corporations (whose owners pay taxes as individuals) did not claim any tax deductions for employee expenses. For all these reasons we judge that the actual number of small-business employers who would face higher tax rates under Obama is probably far below 663,608, and certainly a far cry from McCain’s ridiculously inflated 23 million figure.

“Small Business owners” make up 75% of the top 5% of the country’s income?

What’s your source for the data on that one, tbrock?