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Thursday, October 16, 2008

Joe the Plumber: Should Tax Policy Be Used To "Spread the Wealth Around"?

Joe Wurzelbacher, a plumber from Holland, Ohio, is enjoying his 15 minutes of fame.  Last week at a campaign swing outside Toledo, he told Barack Obama that he was planning on acquiring the plumbing business he worked for and asked whether he would pay higher taxes under Obama's tax plan since the business would earn $250,000 or $280,000.  Obama discusses his tax philosophy in this exchange:

In last night's presidential debate, "Joe the Plumber" took center stage as the candidates mentioned him over twenty times.  Perhaps the most memorable exchange was Obama's contention that his tax plan would "spread the wealth around," and McCain's retort that "Now, of all times in America, we need to cut people's taxes. We need to encourage business, create jobs, not spread the wealth around":

Citizens for Tax Justice, Don't Mess With Taxes, and the Tax Foundation (here and here) take a detailed look at Joe the Plumber's taxes.  The national spotlight can be harsh:

http://taxprof.typepad.com/taxprof_blog/2008/10/joe-the-plumber.html

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» One more go at Joe from Don't Mess With Taxes
As the day has gone on, more attention has been paid to Joe the Plumber and his potential federal taxes and overdue state taxes. I'm sure he's feeling a bit akin to the lead character in Kevin Costner's latest (and little-seen) election-themed movie, S... [Read More]

Tracked on Oct 16, 2008 3:04:19 PM

» Leave Joe alone from Roth & Company, P.C.
The press has taken an unnatural interest in the tax life of Joe the Plumber, who had the nerve to... [Read More]

Tracked on Oct 17, 2008 6:26:59 AM

Comments

The Daily Kos is reporting that Joe's actually a McCain supporter, that he may have had some contact with the McCain camp before the debate, and that he's not registered to vote.

Posted by: S | Oct 16, 2008 1:08:36 PM

I must say, having just paid over $1000 for a morning's work on my heating system, my sympathies are not really engaged by the tax problems of plumbers...

Posted by: Jim Baird | Oct 16, 2008 1:35:30 PM

And he reportedly owes some $1200 to a hospital and they have another lien for that money. Poor Joe.

Posted by: Anonymous Contract Lawyer | Oct 16, 2008 3:43:15 PM

I'm pretty sure you know he isn't "enjoying his 15 minutes of fame." He's having his entire life sifted through and aired to the world for having dared to express an opinion.

If someone had asked I'd have bet money you wouldn't take part in smearing a private citizen this way. Is this the sort of blog you mean to be?

Posted by: Beej | Oct 16, 2008 4:20:40 PM

The Associated Press reports that Joe the Plumber lacks a plumbing license.

It's my understanding he doesn't need one. Shouldn't we wonks at least try to get it right? You know the AP doesn't.

Posted by: Beej | Oct 16, 2008 4:22:50 PM

Shouldn't we be more worried about the tax liens of Obama's campaign treasurer?
http://hotair.com/archives/2008/10/17/guess-who-else-has-tax-liens/

Posted by: | Oct 17, 2008 7:17:53 AM

Forget the character attacks, however deserved or not. Let’s deal with the actual issue that was raised. Here’s a highly
relevant excerpt from the (very) conservative Wall Street Journal article of OCTOBER 17, 2008, 'As Joe the Plumber Grows Famous, the Politics Get Murkier':

"To reach a level that would be affected by Sen. Obama’s proposed tax increase, Mr. Smither said, a mom-and-pop plumbing company like Newell would have to clear $5 million in annual sales. [Joe’s company actually reports only $100,000 in sales.]

Even if Mr. Wurzelbacher reaped taxable income from his business of $280,000 a
year, he'd pay only about $900 more a year in taxes under Sen. Obama's plan, which
would raise the tax rate on the income between $250,000 and $280,000 to 36%
from 33%.

[...]

If Mr. Wurzelbacher earns the wages of a typical Ohio plumber, $40,600, and holds a $90,000 mortgage, he would see a TAX CUT (emphasis added) under Sen. Obama's plan of more than $1,000, compared with no tax reduction under Sen. McCain's.

If he succeeds in buying the plumbing business where he works, he could see even more tax benefits, including Sen. Obama's proposed elimination of capital-gains taxes for small-business investment, a 50% tax credit to purchase health insurance for employees and a $3,000 tax credit for every new hire over the next two years."

Yep … facts are pesky things.

Posted by: UnaffiliatedIndie | Oct 17, 2008 9:52:46 PM

Joe is just a regular guy that's smart enough to know there is NO JUSTIFICATION to increase the tax rate to 39% for income over 250,000. Those that make this much already pay a majority of the taxes in the US. Why punish sucess at a higher rate than mediocrity or outright laziness? Only one answer - SOCIALISM!

Posted by: tbl_texas | Oct 18, 2008 4:56:55 PM

Then, tbl_texas, Ronald Reagan was a communist. Reagan's top marginal income tax rate was 50%. And Dwight D. Eisenhower was...what's left of communist? His top marginal income tax rate was over 91%.

But I guess you're arguing against having any progressive income tax. Which would be a return to the 19th century (or maybe even 18th century). The United States has had a progressive income tax since 1913 and also during the Civil War. In 1913 only the highest earning 1% of taxpayers paid any income tax, as a matter of fact.

Of course, since 1913 the United States has enjoyed the biggest surge in private investment and wealth accumulation in its history (in the aggregate). Obama simply wants to return the top marginal tax rate to what it was during the roaring Clinton Administration -- the single best economic period in U.S. history. I don't know about you, but I'd love a return to the economic performance of the late 1990s.

Now, if you did have a single income tax bracket, you'd have to set it in the high 20s or right at 30%. Let's say 25% for sake of argument and to call it a little low. That means, if you earn $20,000 per year, you only take home $15,000. (Actually, less than that because there's FICA also.) Someone earning $20 million per year takes home $15 million. In the former case you've got the difference between eating dog food (on sale) and visiting a soup kitchen, and in the latter case you've got the difference between caviar and caviar. Taxes are already tough enough for the $20K earner, but is a single 25% tax rate what Jesus would have wanted? Maybe Jesus was a socialist.

But let's assume you do earn $20M, and let's assume you're purely selfish. You want to benefit from government services, even disproportionately -- America has been very good to you -- and screw everybody else. Here's the thing: if the $20K earner actually buys dog food, somebody has to manufacture it. Like maybe that $20 million CEO of the pet food company? You see, progressive income taxes actually help keep hard earned dollars in the wallets of workers who are most likely to spend them. (Has to do with elasticities if you're into economics.) That helps the whole economy, creates jobs, and generates a lot more wealth for everybody. Even Henry Ford had this figured out almost a century ago when he paid Ford Motor workers enough so they could buy his products. (Henry Ford was one hell of a capitalist.)

A progressive income tax is simply Henry Ford's policy writ larger. Let less affluent workers keep their money so they can spend it, and consumers will keep powering the whole economy. And making new and more billionaires in the process who can pay 39% top marginal tax rates. Which is exactly what Warren Buffett (now America's richest person) favors, yet another arch capitalist. He's endorsed and advises Obama.

Posted by: Timothy | Oct 18, 2008 9:55:22 PM

RE: Taxes for those earning over $250K...

Fred & Wilma earn $300K after all deductions. They own and operate a convenience store. Each put in 84 hours per week for a total of 168. At home, they HAD to hire on a housekeeper to do the cooking, laundry, cleaning, getting the kids in and out of school...

Barney & Betty also earn $300K after all deductions. They are day traders, landlords and receive bank interest. Each puts in maybe 10 hours per week for a total of 20. At home, they hired on a housekeeper to do the cooking, laundry, cleaning, getting the kids in and out of school. They did this because they CAN...

Next tax time BOTH couples will have let the housekeeper go. Fred & Wima because they HAVE to...Barney & Betty because they CAN!

Poor housekeeper!

Posted by: Tony Nesci | Oct 18, 2008 11:39:03 PM

"A progressive income tax is simply Henry Ford's policy writ larger. Let less affluent workers keep their money so they can spend it, and consumers will keep powering the whole economy. And making new and more billionaires in the process who can pay 39% top marginal tax rates."

Good point. Spending powers the economy.

Of course, taxes are harsh against those in the upper middle class and those that are decidely less wealthy than Warren Buffet. And, of course, the inconvenient truth that, yes, purchases by the upper middle class and "rich" (however you want to define this) also help power the economy. Seriously. Dollars from the poor are not the only consumer spending that is advantageous to the economy.

Think about it. The upper middle class and "rich" spend money (thus, each of their extra expenditures - i.e., those beyond basic necessities - are also supporting businesses that creates jobs).

The typical response is that....they might "save their money" (OH NO! HOW HORRIBLE...WON'T THEY LEAVE THEIR RETIREMENT UP TO THE POLITICAL DISASTER/SOON TO BE INSOLVENT SOCIAL SECURITY AND SPEND IT ALL NOW!!). Certainly, they will save some. But, overall, consumption increases as wealth increases.

Look, I am decidely on the fence on Obama. I hate the Iraq War and would love to see us withdraw ASAP. However, I will admit that I am a bit of a "fiscal conservative" when it comes to taxes/spending. I cannot stand his "spreading the wealth around" comment (whether or not it was a remark from a conversation with a plumber). It is not his wealth to spread around.

Income redistribution - that is what the "progressive tax system" represents.

If you think of taxes as, essentially, paying for governmental services, then it is no different than - for example - going into a restaurant with a friend and each being charged differently for the same meal. This is not a big deal to those that do not have to pay the higher bill (after all, they say, "you can afford it")... Yes, maybe so. But, does it make it right?

Those in the higher tax brackets are being asked to pay our share plus other people's share.

That may be great for those not asked to pay a greater percentage of their income in taxes, but it really is inequitable.

At the end of the day, so much money is wasted in Washington or sent elsewhere. I would love to see Washington eliminate the waste and become more fiscally responsible. Not going to happen anytime soon.

The tax code allows for voluntary payment of additional taxes (i.e., essentially donations to the US Government). How many of those that believe is spreading the wealth have signed up for additional taxes?? I will bet that none have.

So, before criticizing those of us that like to reap the rewards of our careers, make a contribution (whatever it takes for you to get up to the 39% that I pay is, of course, not necessary..)

FINAL NOTE: Save the bashing of this plumber guy. Why in the world do we care who asked the question? This guy did nothing more than ask a simple freaking question. Isn't the answer more important? After all, Joe the Plumber isn't up for political office...Barack Obama is. The guy could have been John McCain himself and I would have thought it was a legitimate question. He should be able to answer what was, essentially, an easy question (and, of course, he could have answered it in a manner that was less likely to make him look bad).

I don't care if the guy has liens (why would that matter) or if he doesn't have a certain license.

Posted by: Mark Green | Oct 19, 2008 3:03:58 PM