What actual political reporting looks like

[brian_igo]

I've been a broken record on the failings of journalists in this election, so I would be remiss if I didn't point out a terrific 500-word piece from today that gets it right.

Fiorina’s Fuzzy Math


This morning at a Christian Science Monitor breakfast Carly Fiorina made the case that Obama’s proposed tax hike on those who make more than $250,000 a year would be damaging to small businesses.

“In the Bush tax cuts, if they are repealed, 23 million small businesses will have their taxes raised. Why? Because 23 million small businesses file their income tax as individuals. And so, when Barack Obama blithely says, only the wealthiest are going to be taxed, he is ignoring the fact that 23 million small businesses file as individuals and those small businesses are the only growing sector of the economy right now and small businesses produce 60%, actually it’s more like 70, 70% of the new jobs in this country.”

Okay, let’s assume there are now 23 million small businesses in the U.S. today (the latest stats I could find were 21.5 million "schedule C" class businesses in 2005). There’s no way that all 23 million of those are netting more than $250,000. In fact, 94.5% of all “flow-through” entities (self-employed folks, which generally tend to be small businesses, though Tiger Woods also falls into this category) had receipts under $100,000 in 2007.

Fiorina was building on a Bush arguement from 2004. Bush loved to cite on the stump the plight of the 4.1 million “subchapter S” companies – another catagory of small businesses that have less than 100 shareholders and pay individual income taxes. As my former Bloomberg colleague Ryan Donmoyer -- the best tax reporter in town -- pointed out, the argument was a bit ridiculous because less than 5% of small businesses who file under sub-chapter S made more than $200,000, Kerry’s threshold in 2004. Putting aside the dubiousness of relying on a stale Bush arguement for his tax cuts, even with the sub-chapter S filers added in 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 – no where near the 23 million Fiorina claimed. I asked Fiorina to elaborate on how she arrived at the 23 million figure. She responded:

“My point is this: when Barack Obama says that the Bush tax cuts only helped the wealthy it is factually untrue. It is factually true that 23 million small businesses file as individuals. It is factually true that small businesses create 70% of the jobs in this country. So I honestly won’t even attempt to explain Barack Obama’s economic plan. You ought to ask them that, though.”

This statement, while factually true, is terribly misleading since only a small percentage of the 23 million small businesses would actually see tax increases and the Obama campaign argues that under his administration small businesses would benefit from his universal healthcare plan, offsetting any tax increases the top tier earners might see. So, when running HP did 23 million = a few hundred thousand? No wonder she got fired.

That's how you do it. Five hundred words to examine a pretty big talking point by a campaign and report the accuracy of their claims. The snarkiness at the end about HP should have been dropped. (Though it was hardly undeserved - the press has treated Fiorina's disastrous reign at HP like her Lexis-Nexis file was made of weapons-grade plutonium.) But this is still one of the best examples of actual reporting I've seen during the entire campaign.

[realtraveller]

Say what you will. I hear Obama saying 'we have to help people save money for their childrens' college education" and then he wants to raise the capital gains taxes so that when college funds are tapped after all that saving, the kids get less to pay for college.

[mjfrombuffalo[$]]

That was a straight reporting piece? It reads more like an analysis or op-ed feature.

[brian_igo]

mjfrombuffalo said

That was a straight reporting piece? It reads more like an analysis or op-ed feature.

Reporting should include analysis. If a reporter just regurgitates what a politician says without checking the accuracy of the claims - that's just being a stenographer.

The writing style is more casual than you'd see in most papers or magazines, but this is still what good reporting looks like.

realtraveller said

I hear Obama saying 'we have to help people save money for their childrens' college education" and then he wants to raise the capital gains taxes so that when college funds are tapped after all that saving, the kids get less to pay for college.

And then you have crap like this, where people pretending to be reporters (like whichever hack said this on his talk show or wrote it on his blog) tie things together where there is no real connection. Having an audience who wants to hear it helps.

College savings funds and individual retirement accounts are already exempt from capital gains taxes as long as they're used for the intended purpose. These funds were not helped when the capital gains rate was cut, and they won't be hurt if its raised.

This is just a shameless campaign to protect a tax rate that, with the rarest of exceptions, only benefits those in the top five percent.

[realtraveller]

brian_igo said

College savings funds and individual retirement accounts are already exempt from capital gains taxes as long as they're used for the intended purpose.

College savings are only exempt from capital gains taxes if they are in a state qualified 529 plan with someone else managing the investment, with fees and what may not be the best returns. If parents sell mutual funds or real estate to fund their children's college education, they are taxed like any other capital gains.

Like everything around taxes it's very complicated.

[jgibson2[$]]

realtraveller said

College savings are only exempt from capital gains taxes if they are in a state qualified 529 plan with someone else managing the investment, with fees and what may not be the best returns. If parents sell mutual funds or real estate to fund their children's college education, they are taxed like any other capital gains.

Like everything around taxes it's very complicated.

Which is why people who aren't investment advisors should consult one before they put big bucks into any particular savings vehicle. We were advised not to put money into our youngest son's name in ANY investment for college since we'd both be over 59 when he's old enough for college. That made our tax deferred annuities and our IRA's the best place to save for his college. Multiple reasons - lower taxes, better returns in many cases, the colleges don't count our 'retirement' savings nearly as much when computing eligibility for financial aid. OTOH, those who are under 40 when their kids are born pretty much don't have that particular option -- there are other ways to save, though.

[brian_igo]

realtraveller said

College savings are only exempt from capital gains taxes if they are in a state qualified 529 plan with someone else managing the investment, with fees and what may not be the best returns. If parents sell mutual funds or real estate to fund their children's college education, they are taxed like any other capital gains.

Like everything around taxes it's very complicated.

Not really. You get the capital gains savings if you agree to set aside those funds specifically for college in a 529. Same as retirement. You get a tax benefit if you invest in a 401K, Roth or IRA but in exchange you agree to not use those funds for your midlife crisis.

Management fees are set by the states, so the next president won't have control over that. About the lower returns, that's also a state issue. You have to really stretch yourself to make this an Obama issue.

[thinkerlady[$]]

We actually were advised to put money into our child's name, in an UGMA account (Pennsylvania Gift to Minors Account). The money can ONLY be withdrawn for educational needs prior to the child turning 21. The danger is that after 21 the child can withdraw at will. We did keep control of the money and didn't disclose its existance until they were 21.

[rmthunter]

Time to resurrect this thread. I ran across this post this morning, which seems to hit the nail on the head:

Since I had this conversation in brief with 2 people today, I wanted to write a post concerning one of the more ridiculous memes being foisted by the media gasbags covering the Democratic Convention.

'Gosh oh gee-willakers, I sure hope we get to know this Barack Obama fella. Maybe he can use this here convention thingy to let us know who he really-for-true is.'

I recommend you read it -- Wulfgar is usually pungent, funny, and pretty much on point, and I think he has this one nailed cold.