KEITH OLBERMANN: Good evening from New York.
With the final session of Congress before
election day coming down to the wire now,
Democrats are still torn between whether to
force Republicans to vote now in defense of
tax cuts for the rich or to duck a vote on
extending the Bush tax cuts and let Republicans
campaign against them for letting all taxes
rise.
If it seems like a no-brainer, our fifth story
tonight should remove all doubt. A Countdown
special report: the reality behind the Republican
argument made by House Republican leader John
Boehner and others that tax cuts for the rich
are simply tax cuts for small businesses whose
owners report their business earnings on their
individual personal income tax returns.
House Democrats have pushed back that some
of those supposedly small businesses are actually
big businesses. And after the White House
identified the right-wing billionaire Koch
brothers as being among those ranks, Bill
Kristol's right-wing magazine, "The Weekly
Standard," fired back, suggesting the White
House had improperly looked at the Koch brothers'
tax returns. In fact, their tax status was
already public information.
But as Countdown discovered with the help
of Pulitzer Prize-winning tax reporter, David
Cay Johnston, who joins us presently, the
Koch brothers are just the tip of a half-trillion
dollar iceberg. A variety of sources, including
court documents, confirm that when Republicans
talk about the small businesses they're trying
to help with their tax cut, they're actually
talking about some of the biggest companies
in the world and some of the richest people
in this country.
Mr. Boehner admitting this summer that his
tax cuts only benefit 3 percent of so-called
small businesses.
So, how small can that top 3 percent be when
it accounts for half of all small business
income?
(BEGIN VIDEOTAPE)
BOB SCHIEFFER, CBS NEWS: Only 3 percent of
those small businesspeople
you keep talking about all the small businesspeople
that are going to get taxed - only 3 percent
would be affected by that. Do you quarrel
with that figure? Is that a right figure or
a wrong figure?
BOEHNER: Well, it may be 3 percent, but it's
half of small business income, because - obviously,
the top 3 percent have half of the gross income
for those companies that we would term small
businesses.
OLBERMANN (voice-over): So, how do they decide
which companies they would term "small businesses"?
H&R Block told "Politico" it has 1.5 million
small clients. But extending the Bush tax
cuts for the rich would benefit fewer than
½ of 1 percent of them.
According to The Joint Committee on Taxation,
fewer than 750,000 people, one quarter of
1 percent of the country, would be affected
by the top rate.
So, how small can this top 3 percent of small
businesses be if they make half the small
business money?
DAVE CAMP (R-MI), HOUSE WAYS AND MEANS COMMITTEE:
And let's remember the context back then.
OLBERMANN: Dave Camp knows. He is the ranking
Republican member on the House Ways and Means
Committee. To him, the definition of small
business is a footnote, literally.
"According to The Joint Committee on Taxation,
94 percent of all U.S. businesses in 2007
were S corporations, partnerships, or sole
proprietorships - pass through business types
commonly used by small businesses."
They call them pass through companies because
they file no taxes, passing through profits
to the owners who report them on their individual
tax returns instead.
In short, they are considered small, not because
they have a small payroll, but because they
have a small number of owners. It's not the
income that's small, it's not the number of
employees that's small, it's just the total
number of owners that's small. In the case
of S corps, up to 100 owners.
BOEHNER: And my colleagues and I have been
listening -
OLBERMANN: When politicians talk about small
businesses, they are including any company
that pays taxes as a pass through.
House Democrats, last week, identified three
limited partnerships that file as pass throughs
- a pipeline company called Enterprise, the
Wall Street firm Kohlberg, Kravis & Roberts,
and the accounting firm PricewaterhouseCoopers.
The Koch brothers' own Web site lists partnership
after partnership after partnership that make
up a small business empire of 70,000 employees.
According to "The Washington Post," more than
1 million people who reported at least $200,000
in income in 2008 were partnerships and S
corps. The richer you are, the more likely
you are to call yourself a small business
that way.
Eighty-nine percent of Americans who make
more than $10 million a year filed as a partnership
or an S corp. In 2008, more than half a million
of these supposed small businesses had more
than $1 million in assets. In 2005, almost
20,000 of them had annual receipts of more
than $50 million.
But if you want to know which companies these
are, you are out of luck, because individual
tax filings are not public record. Still,
some have revealed themselves. The S Corp
Association lobbying group is chaired by an
executive of the Hillman Company, a small
business founded by a billionaire. The S Corp
group president is from Venn Strategies, a
small business whose chief operating officer
is a former special assistant to President
Bush, whose president used to work for Senate
leader Reid.
Directors of the S Corp group come from Ferrellgas,
which provides propane and propane accessories,
with a small business touch, to 1 million
customers - a small business.
CoorsTek, North America's largest maker of
technical ceramics, a small business founded
by Adolph Coors - a small business.
The Dead River Company, a small business,
with 1,200 employees, half a billion in annual
revenue, and commercial real estate valued
at $300 million - a small business.
And a small business called McIlhenny, the
McIlhenny family selling their Tabasco brand
pepper sauce out of their kitchen to 160 countries
- a small business.
"The Boston Globe" revealed in 2007 that Fidelity
Investments was becoming an S Corp, a move
that saved this small business hundreds of
millions of dollars.
Similar to how a scrappy little newspaper
called "The Tribune," as in "The Chicago Tribune,"
made an extra $1.9 billion by converting to
S Corp status in 2008.
As tax reporter David Cay Johnston figured
out, other companies get revealed as "S" corps
when their filings become evidence in tax
trials.
That's how he identified one of the biggest
small businesses in the world -
Bechtel, a small business that builds airports,
seaports, railroads, oil refineries, nuclear
power plants. But back when it was just ye
olde Bechtel shoppe, they built the Hoover
Dam. And today, 49,000 employees, $31 billion
in revenue, the world's number one engineering
and construction firm, a small business.
Companies aside, who are the actual people
who would benefit from the Republican tax
cut for the richest small businesses? Him,
for one. "Bloomberg News" reports the president
and other big authors and actors and celebrities,
even hedge fund managers, file as S corps
to save on taxes.
Nor is Mr. Obama the only famous S corp owner.
Recognize this guy?
How about now?
Thanks to court documents reviewed by Countdown,
we know one of Texas' two richest men in the
1990s became an S corp back in 1991. Senator
John McCain knows about S corps.
MCCAIN: Small businesses are the job generator
of America.
OLBERMANN: Mrs. John McCain filed as an S
corp back in 2006 - a small business owner
who owns a massive beer distributorship and
reported income of more than $6 million.
And then there's small businessman Philip
Anschutz, a small businessman who gave $30,000
to the Senate Republican campaign committee
last year, and $15,000 to the House - on top
of his family's more than half a million to
Republicans over all.
Mr. Anschutz owns at least a part of more
than 100 small business - small railroads,
small oil companies, small sports stadiums,
small arenas, a small national movie theater
chain, a small half of small Major League
small soccer, the L.A. Kings, the L.A. Lakers.
His small business entertainment company likes
to clean out the old garage now and again
to put on small shows by Bette Midler and
Cher.
Mr. Anschutz even owns small newspapers, including
"The Weekly Standard."
(END VIDEOTAPE)
OLBERMANN: Countdown has even identified one
S corp owner whose reclusive founder and chairman
actually works out of these very NBC headquarters
in New York.
Hi. Technically, I'm a small business.
As promised, let's bring in Pulitzer Prize-winning
tax reporter David Cay Johnston, the author
of "Free Lunch: How the Wealthiest Americans
Enrich Themselves at Government Expense (and
Stick you with Bill)." He's also a columnist
for "Tax Notes."
David, thanks for your time again tonight.
DAVID CAY JOHNSTON, AUTHOR, "FREE LUNCH":
Thank you, Keith.
OLBERMANN: First of all, did we explain what's
going on correctly, and can you flesh it out
a little bit for us?
JOHNSTON: Everything you said was correct
and it's actually much worse than this -
OLBERMANN: My goodness.
JOHNSTON: - because in addition to being pass
throughs - in addition to being pass throughs,
many of these enterprises benefit from all
sorts of tax rules that allow them to take
money now and then pay their taxes 10 or 20
years in the future. That's an enormous benefit
and a subsidy that ordinary working people
who have their taxes taken out of their paycheck
before they get it are, in effect, financing
for these businesses.
In addition, about 900 of these small corporations,
it looks like from the statistics, paid no
income taxes, even at the personal level of
the owner.
OLBERMANN: When we think about small businesses
colloquially, or as we would say, you know,
using English, we think of small mom-and-pop
hardware store, we think of some online company
that is run at somebody's home, some employee
somewhere who's trying to break out on his
own and starts his own company selling the
proverbial widget.
Are any of those kinds of businesses in the
range that Republicans are trying to protect
in their supposed so-called "benefits" for
so-called "small businesses"?
JOHNSTON: Well, Keith, yes, there are some.
I mean, you can have an author. Maybe my next
book, I can make enough money to be coming
on your program for it.
OLBERMANN: Yes.
JOHNSTON: There are people who may own a chain
of fast food stores or a successful group
of liquor stores. But they're a small proportion
of this. There are about, as you mentioned,
15,000 S corps that have an average revenue
of $150 million, and then there's another
18,000 partnerships that have an average revenue
of about $137 million.
OLBERMANN: These rich guys, though, paying
the top rates - they'd have to pay a lot more
in taxes if the Democrats don't renew the
top Bush tax cuts, right?
JOHNSTON: Well, yes and no. They do, after
all, have access to tax shelters. There are
all sorts of fine rules. The reason the tax
code is so thick has nothing to do with ordinary
Americans. It has to do with favors bought
with campaign donations.
But, yes, overrule, they will pay higher taxes,
which will go to provide better infrastructure
so they can move their goods and services,
educate people, so they have people to buy
their products, et cetera.
OLBERMANN: Just putting aside for a second
the Orwellian quality of this whole thing,
that peace is war and big business is small
business - in terms of hiring, regardless
of the size of business, the GOP argument
is that raising taxes would curtail new jobs,
would curtail hiring. Is that really the biggest
factor? Or don't businesses wind up deducting
those costs in any case from their own taxes
and their own expenses?
JOHNSTON: Well, economic theory says there
should be less job creation when we raise
taxes. Well, Bill Clinton had Congress raise
taxes in 1993 and eight years later, they
were cut, and again 10 years later, under
President Bush. During Bush's eight years,
3.5 million jobs were created. During Clinton's
years, six times as many, 21 million jobs.
In fact, during the Clinton years, more jobs
were created in those eight years than in
the 20 years of Ronald Reagan and both Bushes
in the White House.
So, I think you have a tough time making that
argument. What matters is what the taxes are
spent on.
OLBERMANN: Last question. Is there law or
code somewhere that define what is a small
business is? Is that - is there actually a
- just a semantical violation here or is there
something more to it?
JOHNSTON: Now, this is essentially semantical.
I mean, the SBA says if you have 500 or fewer
employees, you're a small business. So, certainly,
by the definition of the Small Business Administration,
many of the companies we've talked about are
not small businesses.
And remember that small businesses also destroy
many jobs. It's a relatively handful of little
companies that go on to become big companies.
The gazelles, they're known as. Like, say,
FedEx, that went from nowhere to being a big
company very quickly.
OLBERMANN: David Cay Johnston, professor of
Syracuse University - great thanks for your
time tonight and for your help on all this.
JOHNSTON: Glad to be here.
OLBERMANN: Here's another shock: the billionaires
who benefit from being small businesses, trademark,
use their money to fund Republican causes,
like tax cuts for small businesses, trademark,
like them. It's not just those small businessmen,
the Koch brothers. Another small business
man we mentioned is funding Pennsylvania Republicans.
And one we haven't even told you about yet
is funneling his tax savings to Karl Rove.
We continue with this - next.
OLBERMANN: We've already shown you how the
Koch brothers by quasi-legal definition own
a peck of small businesses Republicans are
trying to funnel tax cuts through. Next, how
they and other small businessmen are in turn
funneling campaign funds back to Republicans.
OLBERMANN: Salon.com reported this week that
91 percent of the money for Karl Rove's new
attack ad group comes from billionaires - three
billionaires. And in our fourth story tonight:
continuing our special report about how the
term "small business" is an utter misnomer,
the "Chicago Tribune" is technically a small
business, as is the world's largest construction
consortium, Bechtel.
Countdown has also learned that one of those
Rove-funding billionaires is - you guessed
it - one of those small businesses whose taxes
Republicans want to keep at Bush era levels,
is Carl Lindner, who gave Rove $400,000 last
month and who made his $1,700,000,000 fortune
through United Dairy Farmers, a small business,
with 100 stores and one of the top 15 ice
cream brands in the country - number 582 on
"Forbes'" list of the world's billionaires.
Not that far below, number 463, Henry Hillman,
whose family bankrolls Pennsylvania Republicans,
with proceeds from his small investment business
which "Forbes" says makes him worth more than
$2 billion.
Let's turn now to MSNBC contributor, Chris
Hayes, the Washington editor of "The Nation"
magazine.
Chris, good evening.
CHRIS HAYES, MSNBC CONTRIBUTOR: Good evening,
Keith.
OLBERMANN: How does the tax cut debate change
now that we know what the Republicans mean
by small business and to what degree the public
has been had?
HAYES: Well, you hope the Democrats hammer
on this. I mean, what's interesting is that
even before this, right, even given the messaging
that the Republicans were doing in this completely
disingenuous small business chicanery that
you revealed, it was still - they were still
on the wrong side of public opinion. I mean,
the fact of the matter is, people understand
the number 250,000, right? They understand
that we are talking about a group of people
that's very - that's quite small and doing
quite well.
And when you climb up the income scale, I
mean you start getting up to incomes that
are, you know, hedge fund - they are hedge
fund people who are making $1 billion in income
in a year. That's a flow. That's not wealth.
That's annual income. People understand that.
So, this was - they were already - public
opinion was already on the side of progressives
on this. The real question is whether the
Democrats are going to politically force the
issue. I mean, I think something like this,
you know, can get rid whatever last vestiges
of resistance there are, but it also exposes
the political economy of the way this works
and the way that upward redistribution has
been sold. Not just in this election cycle,
but for the last 30 and 40 years.
OLBERMANN: Incidentally, thank, Chris, for
providing those home movies of your yacht
and your champagne.
Greg Sargent at "Plum Line" reported that
the speaker, Nancy Pelosi, is getting pressure
still from the conserve-crats, the conservative
Democrats, who say that holding to the middle
tax cuts - holding the vote is going to make
them vulnerable on Election Day and a lot
of them are pushing to include these GOP tax
cuts for the rich as well. The Democratic
Congressman Brad Ellsworth of Indiana just
said today. He said, "Get the issue off the
table. It will be much easier for us."
How much crazier does that plan now look,
now that we know who they'd be helping out
by using that plan?
HAYES: It's so politically, morally, logically
bankrupt that it beggars belief. I mean, I
wrote a future for "The Nation" magazine last
week and I talked about the Blue Dogs and
the big hustle the Blue Dogs has, right - have
- is that they say, our big thing, we're united
around one thing, which is deficits. That
is the way that they trump themselves. That's
their identity as a caucus.
And what they are doing here now is to say,
"We want you to add $700 billion to the deficit
over the next 10 years," and then much more
in perpetuity, right? Because we're not talking
about sunsetting any of this. This is out
into the future as far as the eye can see.
That's what they're taking a stand on.
So, it should never be reported - no one should
ever say, never let it be said about the Blue
Dogs that they care about the deficit. They
do not care about the deficit. What they care
about is representing the interests of wealthy
people that give them lots of money, and - or
some - you know, or themselves. I don't know.
I'm not going to impute to them what their
motives are, but what is clear is that they
don't care about deficits.
OLBERMANN: We have a draft of this GOP plan
that the party - the unsigned one - that the
party is officially revealing tomorrow. It
calls for making the Bush tax cuts permanent
for everybody, including, quote, "the entrepreneurs
and the family-owned small businesses on which
we depend to create jobs."
How does that play now that we know that the
families owning these small businesses are
worth billions?
HAYES: And not only are they worth billions,
but they are funding this entire enterprise.
I mean, that is the thing that is so insidious
about what we see. I mean, there is - this
is part of a larger phenomenon in the American
political economy. There's a book "Winner-Take-All
Politics" by Jacob Hacker and Paul Pierson,
I really recommend it to your viewers, and
it talks about the way that we've seen this
massive rise in inequality over the last 30
years, on the front end, right, before taxes
are paid. And then what our government has
done is it's come in and it exacerbated that
inequality by cutting taxes for the wealthy.
And we've already seen it chipped away - you
know, even when we're talking about Democrats,
we're not really talking about a tremendous
amount of redistribution that's even on the
table, right? This is really at the upper
end, and there's already things like the carried
interest loophole that allows hedge fund people
to pay 15 percent. That's not even the table.
So, we're barely even getting at this issue,
and the sort of small business story has been
one of the most powerful stories that conservatives
and the wealthy have used to continue to enrich
themselves, despite the trends in the economy.
OLBERMANN: This nice little snake eats its
own tail loop, the Republican pushes for breaks
for small businesses, small businesses that
are so classified only because of the number
of their owners, and then the giant small
businesses feed campaign contributions back
to Republicans.
HAYES: Right. Exactly.
OLBERMANN: Close the loop. I mean, we already
know about the Koch brothers. But now, we're
starting to see a picture emerge of one rich
right-wing family after another funding the
GOP so the GOP can run on tax cuts that will
benefit one rich, right-wing family after
another - is that about it?
HAYES: Yes. I mean, we're seeing something,
I mean, that - I don't want to use the word
pooch or plutocratic pooch to describe this
-
OLBERMANN: Yes.
HAYES: - because all this is in the confines
of non-Democratic activism, but what we are
seeing is essentially a power play by the
nation's plutocrats. And the Citizens United
decision has sort of opened the flood gates.
I mean, there are reports, you know, there's
a meeting on the Hill the other day where
basically vulnerable Democrats said, "We are
getting killed right now by money that's flowing
in." And this is just tip of the iceberg.
OLBERMANN: MSNBC contributor Chris Hayes - thanks
for helping us flesh this out tonight, Chris.
HAYES: Thank you, Keith.
