Joe the Plumber's taxes

We have a new political star, Joe the Plumber. The big question is, how much more or less in taxes will Joe pay under the presidential candidates' tax plans?

The next big question is, who will portray Joe the Plumber on Saturday Night Live and whether a particular tasteless anatomy joke will be part of the skit?

In all seriousness, business taxes are a critical component of the tax proposals offered by presidential contenders Barack Obama and John McCain.

During last night's final debate, both men addressed the overall topic of taxes, and to a degree, Joe's personal concerns.

"Look nobody likes taxes. I would prefer that none of us had to pay taxes, including myself," Obama said. "But ultimately we've got to pay for the core investments that make this economy strong, and somebody's got to do it."

That prompted McCain to respond, "If nobody likes taxes, let's not raise anybody's taxes, okay?"

I realize it was a "debate" in which sound bites were as much a goal as substantive discussion, but I've got to go with Obama on this one.

McCain has repeatedly said he will balance our enormous budget deficit in his first term. I don't have an advanced math degree and I haven't stayed in a Holiday Inn Express at all this year, so  maybe that's why McCain's pledge doesn't seem possible.

I just don't see how he can pull that one off. There's not nearly enough so-called extraneous spending to make up the costs of:

• Our military personnel in Iraq and Afghanistan,
• The $700 billion financial services bailout (plus add-ons), and
• McCain's own new tax breaks

And let's not forget that the core of McCain's tax philosophy, stated repeatedly, is to make Dubya's existing tax breaks, set to expire at the end of 2010, permanent.

Joe's tax bill: But let's leave that larger tax issue for a moment and look at Joe's specific situation.

Joe is Joe Wurzelbacher of Holland, Ohio, who has been a plumber for 15 years. He encountered Obama during a campaign visit to that battleground state amd point-blank asked the Democratic candidate, "I’m getting ready to buy a company that makes $250,000 to $280,000 a year. Your new tax plan is going to tax me more, isn’t it?"

Obama acknowledged that might indeed be the case, but also pointed to tax credits that could make a difference in Joe's and other small business owners' cases. And it looks like McCain's latching onto Joe as as an example  of widespread tax increases for small businesses under the Obama plan is not quite accurate.

The New York Times cites Small Business Administration data showing fewer than 6 million small businesses that actually have payrolls. The remainder are operations reporting income from hobbies or freelance work.

For those taxpayers, which includes me, the nonpartisan Tax Policy Center found that fewer than 700,000 of us would have to pay higher taxes under the Obama plan.

So are there, as McCain says,"millions of Joes" out there looking at higher taxes if Obama is elected? Probably not.

Joe's flat tax question: Reports of the Wurzelbacher and Obama encounter note that the businessman also raised the flat tax issue.

Neither the Obama nor McCain are flat-tax supporters. Both candidates instead stick with tweaks to our current progressive tax system.

MSNBC's First Read political column details the Obama-Wurzelbacher exchange. As for a flat tax, here's what Obama had to say about that concept during his conversation with Joe the Plumber:

You know, I would be open to it except here's the problem with a flat tax is that if you actually put a flat tax together, in order for it to work and replace all the revenue that we've  got, you'd probably end up having to make it like about a 40 percent sales tax. I mean that's the value added, making it up. Now some people say 23 or 25, but in truth when you add up all the revenue that would need to be raised, you'd have to slap on a whole bunch of sales taxes on. And I do believe for folks like me who have worked hard, but frankly also been lucky, I don't mind paying just a little bit more than the waitress that I just met over there who's things are slow and she can barely make the rent. Because my attitude is that if the economy's good for folks from the bottom up, it's gonna be good for everybody. If you've got a plumbing business, you're gonna be better off if you've got a whole bunch of customers who can afford to hire you, and right now everybody's so pinched that business is bad for everybody -- and I think when you spread the wealth around, it's good for everybody.

You can watch the conversation yourself in the AP video below or click here if you're reading via RSS.

But despite all the attention as the new face of America's small business owners, Joe's not saying which candidate will get his vote on Nov. 4.

Multiple Joes: There are a couple of Web pages for some plumbing Joes, but none is Wurzelbacher.

One Joe the Plumber offers his plumbing and handyman services to residents of Oxnard, Ventura and Camarillo, Calif.

Another Joe the Plumber is based in Seattle, Wash.

And the owner of the prized joetheplumber.com URL is right here in the Lone Star State. Judging from his site's graphic, Joe the Plumber in Amarillo, Texas, obviously has a sense of humor about portrayals of his profession.

Is there a Joe or Josephine the Plumber in your neighborhood? If so, have you asked him or her what they think about the presidential race and how it might affect them personally and as business owners? If so, please let us know.

Comments

[plumbers tampa fl]

I guess your question was without merit because he had back taxes. I guess his character is in question because he asked Obama a simple question the Almighty who made Obama look bad. The fact is that Obama is more likely to become a plumber than to reduce taxes. Lower taxes goes against everything he stands for.

[Carl]

Nice neighborhood of Toledo would be the last three blocks before the Michigan state line.

In all seriousness, this guy would get so royally screwed with a flat tax of 30%, it isn't even funny. Under the Obama plan, he probably gets a refund and pays maybe $4000 of wihthholding taxes on $40000. Flat tax - $12,000.

[Elizabeth]

Joe the Plumber lives in my sister's neighborhood. I think THAT'S FUNNY. He lives in just about the nicest suburb of Toledo. I know that ain't saying too much, but it's very nice there. If he's been behind on his income taxes, he better move to the slums of downtown Toledo.

[MD]

I'm confused. If Joe meant he was buying "a business that MAKES $250,000 a year", i.e. profit - then Holy cow! I wanna be a plumber. No, actually, I want to buy that business with $40,000/year. That's a no-brainer. What should a business like that cost - minimum $2M to $4M?

Joe, how big is your matress stash? No wonter the state immediately investigated his finances, considering he owed over $1,000 in back taxes.

Or did he mean a business that grossed $250,000 a year? After paying the fleet of $40K/year plumbers, Joe might go home with a few tens of thousand extra in his pocket, but he's still better off under Obama's plan. I have trouble imagining him affording that, unless the profits will go to pay the cost of buying the business - which means write-offs galore for aseveral years, and even more savings under Obama's plan.

[Ron@TheWisdomJournal]

The real question is: Do you actually believe Obama? What is his record on tax cuts?

[funkycamper]

Oh, please...first, the taxes are paid on net profits, not gross. Second, the estimated increase in taxes on someone making $250k/year profit is $800 under Obama's plan. So, for $800 someone is going to fire staff, cut off medical benefits, and maybe even close down their business? That's ridiculous. Even a tax of 10x that to $8,000 extra wouldn't have that kind of effect.

[Retired Syd]

This is why America is in such dire straits economically. If people actually think it's better to make $40,000 and pay no taxes than it is to make $250,000 and pay taxes, then, yes they should stay home and out of running our county's businesses.

We need people with at least a bare minimum of financial savvy to run our businesses. It would help the country if people understood basic finances, but I know that's too much to ask.

[boomie]

Retired Syd said:

"But is Joe REALLY going to opt to continue making his $150k instead of $250k because his taxes are going to go up?

If so, Joe deserves to keep making the lower amount. There you go, Joe, you kept your taxes down."

You just proved McCain's point: why should Joe work any harder? If he does, he would have to pay more in taxes under Obama's plan. So, yes, Syd you're right. Joe should stay home, work less, pay less in taxes, not work so hard and hopefully if his income comes down even more, he just may qualify for those 'tax credits' Obama is going to be sending everyone in the mail.

And as both Obama and Biden said 'how many plumbers do you know who earn $250K a year?" Well, I know of one that comes to mind: The Millionaire Mommy Next Door. She and her plumber hubby earn $250K+ while she sits home in her pajamas.
http://millionairemommynextdoor.blogspot.com/2007/08/how-i-became-millionaire-while-working.html

They both managed to become millionaires from their plumbing business.

As for the statement that you don't care about hobbyists and freelance businesses because they don't hire employees, maybe not. But they sure do bring a lot of money into the environment: purchasing power, consumerism etc. If someone who has, let's say a hobby of remodeling vintage cars earns more than $250K, why would he bother to pursue the hobby if he has to pay more in taxes? Maybe he can restore bicycles instead.

The point is, as was so brilliantly exposed by just a regular Joe Blow, that Obama's plan of spreading the wealth is socialism, and against the grain of most hard working Americans. The left may now be spending their time dragging Joe the Plumber in to the mud by stating he really isn't a plumber, had unpaid taxes (that's the point! taxes are too expensive! he can't pay them) doesn't change the facts. The more the left rears it's ugly head, and the more that Obama supporters enjoin in despicable acts, the more I want nothing to do with their ilk.

Slanted polls may say Obama is ahead but let's see what really happens on 11/4 when hard working Americans enter those voting booths (providing ACORN hasn't corrupted them also)

Remember Kerry?

[Taxrascal]

"The $700 billion financial services bailout (plus add-ons), and..."

If the plan is implemented this year, it's likely to add net revenue for 2009-12, when McCain or Obama are in office. The money isn't being given away; it's being invested in assets including equities. Since the government's cost of funds is about 4%, and they're buying assets with a huge liquidity discount and at distressed prices, they could end up making huge amounts of money. See taxrascal.com/tax-qa-who-pays-for-the-bailout-and-how/183/ for some details.

[Retired Syd]

Turns out I was WAY off in my earlier comment. Turns out Joe (or Samuel the sort-of plumber) wasn't really planning on buying the plumbing business, and it probably wasn't netting over $250k of income AND Joe's tax return for last year shows he makes about $40,000. A sum that puts him solidly in the beneficiary camp under Obama's proposed tax plan.

So when Joe said, "I'm not voting for you because you will raise my taxes", what he really meant is "there's no way I would ever vote for you, whether you lowered my taxes or raised them."

[Retired Syd]

Here's what I really object to in all this Joe the Plumber Debate. The idea that McCain put forth that now Joe is not going to want to buy that business (or rather "be part of that American Dream of owning a business".)

Come on. Presumably Joe is moving from some smaller amount of pay if he is going to have to pay more taxes by buying this business, let's suppose Joe makes $150k right now. So his taxes will, indeed, go up if he buys this business and makes in excess of $250k.

But is Joe REALLY going to opt to continue making his $150k instead of $250k because his taxes are going to go up?

If so, Joe deserves to keep making the lower amount. There you go, Joe, you kept your taxes down.

[boomie]

"The New York Times cites Small Business Administration data showing fewer than 6 million small businesses that actually have payrolls. The remainder are operations reporting income from hobbies or freelance work.

For those taxpayers, which includes me, the nonpartisan Tax Policy Center found that fewer than 700,000 of us would have to pay higher taxes under the Obama plan."

Of the 700,000 business owners that will pay more taxes under Obama's plan, you didn't mention how many employees will be laid off if those joe-the-plumbers can't afford to stay in business any longer?

Yes, under Obama America will be teaming with millions and millions of self employed people who either lost their jobs or must remain small so as to avoid the extra taxes to stay in business and eek out a living.

Brilliant!

[peter]

"The New York Times cites Small Business Administration data showing fewer than 6 million small businesses that actually have payrolls. The remainder are operations reporting income from hobbies or freelance work."

But we don't care about the freelancers and hobbiests. They aren't creating employment.

We care about the small businesses that DO create jobs. The SBA data merely proves that more of the burden falls on small business job creators than it does on big business and the uber-rich.

I think it's nitpicking when we point to the Tax Policy Center study that says "only" 700,000 small businesses would have to pay more taxes under the Obama plan.

The TPC study is merely an estimate. And even if it were precisely accurate, it proves McCain's general point that a significant number of small businesses will have to pay more taxes under Obama's plan.

Query whether the small business owner might lay off one or two of his employees and begin working a double-shift to cover the added Obama tax burden?

Maybe he won't fire anyone and instead terminate his employee's heath insurance coverate to make up for the increased taxes?