onpolitics

It was interesting to watch the dialoge between McCain and Obama on the topic of “Joe the Plumber.”  Obama ran into Joe during a campaign rally, and Joe remarked that he would not be able to purchase the plumbing company that employees him because the company earns more than $250k and therefore Joe’s taxes would increase under Obama’s plan.  If that was the case, Joe didn’t want to pay more in taxes and it would no longer be feasible to purchase the company.

Joe thought it was incredibly unfair that he would be taxed more.  Just because a company earns $250k on a tax form doesn’t mean the business owner sees those funds.  Joe mentioned that he would be paying off the company over a number of years.  So those funds the company earns, and Joe is taxed on, go right back to the bank, or the original owner who is financing the purchase.  If Joe has to purchase equipment for his business and doesn’t depreciate it all in one year, he’ll be taxed on income that he used to purchase equipment for his business.  He doesn’t have the income because it was paid to the equipment company. But he’s being taxed on it.

Sole Proprietorships and Partnerships are currently being taxed at 37.9% and under Obama’s plan, it will rise to a staggering 50.3%.   Joe is going to owe over $94k in taxes under the current plan, and over $125k under Obama’s plan. On paper the company may have earned $250k, but in reality there may not $125k sitting in the bank at the end of the year. 

This is the problem with raising the individual tax rate for those “earning” over $250k.  The business “income” is not true income to the individual.  The individual did not “earn” that income, and did not receive a check for the money.   But Obama is ready to spend it. 

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