Obama says he will tax any business at 36 percent that makes up to $250,000 and that he will tax at 39 percent after that. How does this affect the American Taxpayer and how relevant, then, is Joe the Plumber?
The answer is, not very. Any 5th grader with a calculator can show you.
Say I make $249,000. My tax is $89,640 at 36 percent and I take home $159,360. Take-home is what is supposed to really matter.
So at 36 percent, if I make another $1,000 dollars rising to $250,000, my tax would be exactly $90,000 and my take home pay would be $160,000. But at 39 percent, that same $250,000 would be taxed $97,500 dollars and my take home dips to $152,500!
This is the Joe the Plumber issue that Republicans are fixated on. It’s all about the take-home pay. Joe the Plumber has a disincentive to make more money, according to this math.
Under Obama’s plan, if at $249,000 I take home $159,360 and at $250,000 I take home $152,500, then how much more would Joe the Plumber have to pay in order to see his take-home pay rise above what he’d take home at $249,000? This would be where his incentive to increase his take- home pay increases.
The answer: another $13,000 bucks. At $263,000, his take home pay is $160,430.
Therefore, Joe the Plumber represents only those ‘upwardly mobile’ taxpayers who would make between $250,000 and $262,000. The Republicans’ argument that small businesses won’t want to grow because of this is ABSURD.
First of all, 98 percent of businesses won’t reach the $250,000 level. The fact of the matter is most business owners and tax payers are quite happy to earn less than $250,000 so they can have a life.
Secondly, of those few who desire that much more and decide to swing for the fence, well, in healthy times we know they are likely to bust out past $263,000 because they have both economic leverage and ambition to pull that off.
Also, people don’t generally say this: “Hi, my name is Joe the Plumber and I’m looking to make $257,000 next year – not $263,000 or more and not less than $249,000.”
The argument that Joe is representative of the taxpayer is a myth that is either contrived by idiots or the deceitful. Those who buy into it sustain the mythology by a simple refusal to do basic arithmetic.
Lastly: Who does pay under Obama’s plan? Everybody who already makes and expects to keep making $250,000 a year.
These are people who control about 80 percent of the U.S.A.’s wealth. They will be required to keep 61 percent of their money, rather than 64 percent, under Obama’s plan.
Ask yourself how sorry you feel for that two percent of the US population – now or when you start hearing about layoffs, seeing people sleeping in cars, or look at your next student loan statement – keeping in mind that those two percent don’t actually need student loans either, do they?
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