Are you Joe Ann the Plumber?
October 17th, 2008 by Liz Fuller
If you watched the final Presidential debate this week then you heard the story of Joe the Plumber. Joe is a real person in Holland, Ohio who spoke to Barack Obama a week or so ago about his plans for changing the tax structure if he is elected. He was concerned that under Obama’s plan he would not be able to afford to buy and expand his business.
I’m writing this post in case you too, as an entrepreneur, are worried about what an Obama presidency would do to your taxes.
So bascially, Joe told Obama that he was planning to buy his business which made $250,000 to $278,000 per year - but since Obama wanted to raise his taxes, he would not be able to afford to buy it and continue to build it.
However, the proposed tax increase applies to people with an adjusted gross income over $250,000 - which means after all deductions have been applied. Since Joe is a single parent, and presumably a home owner, and has other deductible expenses his taxable income may not even be over $250,000.
But even assuming that his taxable income is $278,000, his tax would not change on the first $250,000 of his earnings. No change. No difference. No increase. Potentially even a decrease.
On the remaning $28,000 he would see an increase of approximately 3% in taxes. Or $840.
So - what Joe the Plumber is saying is that he can’t afford to buy his business because he will have to pay an additional $840 per year in taxes.
My advice would be that if Joe’s profit margin is so slight that $840/year or $70 per month is the deciding factor - then maybe he couldn’t afford to buy the business in the first place.
Now if Joe is really thinking of buying the business - his profit margin is probably better than that. More than likely, Joe is thinking he will have to pay an additional 3% on all of his earnings before deductions, or an additional $8340.
In all likelihood, Obama’s proposed tax plan won’t adversely affect Joe the Plumber. Less than 2 out of 100 small businesses make more than $250,000 in taxable income. So 98 out of 100 small businesses will see no increase in their taxes under the proposed plan - and may even see a decrease due to reductions in capital gains, reductions in lower income tax brackets and small business tax credits.
Tell me what you think - are you worried about proposed tax changes to your small business?
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This entry was posted on Friday, October 17th, 2008 at 7:30 am and is filed under finances. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
October 17th, 2008 at 10:29 am
I’m less concerned about taxes than I am about regulatory environment. Governments at every level have stuck their noses into so many aspects of business that sometimes I find it amazing that there are any small businesses at all. Some days I think the only reason we still have small businesses is that there’s no way the government can hire enough enforcers and inspectors to ensure full compliance with all the laws.
Don’t get me wrong, I think some regulation is necessary to create a safe business environment. But it’s clearly gone too far when volunteers can’t clean their own church building unless they use the OSHA-approved cleaning supplies, and there’s a MSDS data sheet for water.
Frankly, I’m not too sanguine about regulations getting easier under either candidate. Obama shows no sign of concern about small business owners in particular, and McCain– well, the byzantine McCain-Feingold campaign finance “reform” law should say all you need to know about his approach to regulation. Since neither politician subscribes to the KISS principle, things are bound to get more complicated.
October 18th, 2008 at 8:25 pm
Oh, and one more thing about the tax plan: that assumes that a Congress with both houses controlled by Democrats will pass Obama’s tax plan without “enhancing” it. If so, it will be the first bill in the history of the United States to ever slide through Congress without being lubricated by generous amounts of pork fat.
October 21st, 2008 at 8:50 am
Hi WH
It’s a good point that people often forget - we’re electing a president who has a vision of the bill s/he wants to pass - but first must convince Congress of it. Nothing ever goes through exactly the way it is originally proposed.
The system has it’s drawbacks as you mentioned - but then again we wouldn’t want to give one person sole control!
October 26th, 2008 at 2:46 pm
Unfortunately, I do not see any major change in store with either candidate. As Liz states, it takes more than just the President to cause change. With all those fat cats in Congress, I would dumbfounded if we actually managed to place meaningful laws into place.
October 31st, 2008 at 9:13 pm
Joe the Plumber is an idiot. Sorry to be so direct. I watched the video where Obama patiently layed out his tax plans (over 5 minutes) to some random guy in the crowd (Joe The Plumber).
The extra tax would be paid on earnings past $250,000, no? Not the whole sum. I think Joe didn’t understand this.
It was clear Joe The Plumber (who doesn’t have a license to be a plumber by the way) wasn’t ever going to be convinced. He called up Fox News and said Obama was like Robin Hood.
I’m not even an Obama fan - we had a smooth-talking prime minister who promised much change in the UK (Tony Blair) and was just an empty suit - so presentation doesn’t mean much to me - but this particular exchange of words about tax made Obama look like he had infinite patience with an idiot who doesn’t understand the basics of how tax works (maybe he’s never paid taxes before?!).
November 3rd, 2008 at 12:24 pm
Hi Liz,
Just wanted to say that I’ve started reading your blog. I’m wondering if you have heard about the book, “What Men Don’t Tell Women About Business”. I heard the guy (Chris Flett) on the Today Show and thought you probably have already heard of him. I’m wondering what your thoughts were. He seems to be really taking on the ‘Old Boys Club”. I just emailed him, but haven’t heard back.
Anyway, keep up the great writing.
Best,
Bihter.
November 4th, 2008 at 5:55 pm
Hi Bihter
I had heard about Chris and that book but have not yet read it - based on your recomendation I’m ordering a copy and will let you know my reaction.
Thanks for the recommendation and for reading the blog!
Liz
November 11th, 2008 at 7:52 am
Hi Liz,
I’ve been doing some additional research on the author, Chris Flett, that I talked about on my last comment. His company is “GhostCEO” (www.GhostCEO.com) and his book is a bestseller. I found it on Amazon here. Anyway, he was in the NY Times last Sunday under the “Career Couch” and he makes reference to women’s blogs like yours so I thought you might like to connect. I’d like to see you interview him and see what he’s all about. I saw on another blog he was a guest blogger. His email is: chris@ghostceo.com
Best wishes,
Bihter.