The most memorable points made in the McCain/Obama debate, from my lowly viewpoint, was the plight of poor old Joe, the Plumber. The story was that Joe has worked for a plumbing company for twelve years, 12 hours a day, seven days a week. Now he wants to buy the company and "give jobs" to other men. He is worried that, should he do well and earn over a quarter of a mil a year, he may have to pay a higher rate of taxes then he would now.
Having some experience in running a small business and having employed up to seven people at any given time, the efforts of both my husband and I never came close to turning that much profit in a year. For that matter, by each holding separate jobs at the same time, our individual wages never matched the figure that Joe has been earning for the past 12 years. Let's do some math:
If Joe has truly worked 12 hours a day for seven days a week, if he was earning union wages, let's say conservatively, $25 per hour -- 40 hours a week at that rate would garner a gross of $1,000 per week. The additional 44 hours per week would be paid at the overtime rate of $37.50 per hour for an additional $1,650, bringing the total to $2,650 per week. Let's say the poor man became so exhausted with that pace that he took a liberal vacation, say four weeks a year, leaving him with 48 weeks per year for an annual gross of $127,200. Not bad, even after deductions for taxes and contributions to the medical plan, (the bulk of which would have been paid by the employer) and, oh yes, let's not forget the onerous Social Security contributions that would have ceased at about the $95,000 mark. Those of us at the bottom of the scale would tend to agree with Senator McCain when he said, "Congratulations, Joe, you're rich!"
But Joe is an ambitious man and he wants to buy the business and give jobs to people. I would suggest that he first consult with a good accountant who can explain to him the business facts of life. He will learn that all the wages he pays will be deductible, including any health insurance he provides for his employees as a perk of the job. Of course, he will be required to pay the Employer's tax for Social Security and other taxes and licenses but those are a part of the cost of doing business and are also deductible. (Should he opt to forego employee health insurance, those same employees are not allowed to deduct the cost of the plan they will have to carry privately.)
At the end of the year, after the aforesaid accountant closes the books, making all adjustments to the books to be sure Joe gets all the deductions for depreciation on plant and equipment, as well as the rolling stock and finds all the loopholes that are legally allowed, the resultant figure will be the one on which Joe will pay income tax under the Obama plan and assuming that he clears the magic figure of $250,000 a year, at about the same rate he is paying now on the lesser present-day income. It may compute to a slightly larger amount than he is paying today but he would have double the income and could well afford to pay it.
Of course, all this is contingent upon his knowing more about the business than simply how to do the work he is performing now. Many a hard-working, ambitious man in the home service business has done well, decided to own his own business and failed miserably within the first seven years. Let's hope that Joe is not one of them.
But from the worm's-eye view of a worn-out old lady, Joe's attitude simply does not make sense. First, it appears to be stupid to deliberately earn less money because a higher income would result in more income taxes. You see, I am from the generation that learned early in life that being honest and paying taxes is the price for the privilege of living in a nation that allows one the freedom to gain wealth and to better the living standard for one's family. It is a matter of the ultimate expression of patriotism that one does one's duty to one's country whether that duty be serving in the military or simply paying the necessary taxes to sustain a free and democratic government. (Republicans are very big on patriotism these days but it does not extend to taxes.)
If Warren Buffet sees fit to complain that his tax rate is too low for all the privileges that he has enjoyed and the prosperity that he has had the opportunity to earn, surely old Joe the Plumber would be able to do the same. We can only hope that he will then be prepared to pay the proper homage to the nation that provided him with the chance to become truly wealthy and that his mindset can mature to the point that he will do it proudly.
