During an appearance on FOX News Channel, former U.S. Representative J.C. Watts (R-OK) repeated the Bush-Cheney '04 campaign's fallacious assertion that Senator John Kerry's proposed tax plan would harm 900,000 small businesses. As Annenberg Political Fact Check and Media Matters for America have noted, the figure Watts touted is a distortion based on the Bush-Cheney '04 campaign's broad definition of a “small business.” Watts appeared as a panelist on Hannity & Colmes with Lanny Davis, White House special counsel to former President Bill Clinton from 1996 to 1998.
From the October 11 edition of FOX News Channel's Hannity & Colmes:
WATTS: Alan [Colmes], let me point out this tax thing. You and Lanny both are saying that he's [Kerry] raising taxes on the rich or he's going to raise their taxes [if elected]. Nine hundred thousand small businesses pay at the individual level rate, they make about $200,000. He'll raise taxes on small businesses as well.
Watts's claim that 900,000 small businesses earn about $200,000 and would therefore pay more in taxes is not true. Many small business owners who have overall income greater than $200,000 earn a majority of their income from sources other than their small business. According to the Tax Policy Center, only about 481,700 small-business owners who derive more than 50 percent of their income from their small business would pay more in taxes.
According to FactCheck.org, which noted the Bush camp's distortion after the second presidential debate, “Bush's definition of 'small business' is so broad that Bush himself would have qualified as a 'small business' in 2001 by virtue of ... $84 in business income.”