Saturday, October 25, 2008

Plumb the Wealth

Here is the short version of the now famous exchange in Ohio between Barack Obama and Joe Wurzelbacher.

Joe: "Your new tax plan is going to tax me more. Isn't it?"

Barack: "It's not that I want to punish your success, I just want to make sure that everybody that is behind you, that they have a chance for success too. I think that when you spread the wealth around, it's good for everybody."

Actually this is an edited version of a much longer exchange. If you read or watch it all the way through, Barack does show off an impressive knowledge of the details of his tax plan and how his plan would affect small business. But Barack made three mistakes.

First, Barack assumed that Joe was saying he would be making more than $250,000 in his new business, but Joe was probably talking about “gross” and income taxes are imposed on “net.” And Joe, because he does not yet own the business and have to file its taxes, probably doesn't understand this distinction either. My quick calculation is that a plumber netting $125,000 would save aorund $1300 under the Obama tax cut plan versus $100 under the McCain plan.

Second, Barack talks about plumbers like Joe making $60,000 to $70,000 10 or 15 years ago when Joe was starting out, but the average plumber today makes around $45,000. It's quite possible that Joe doesn't even make $70,000 now. This is where Obama gets the reputation for being an elitist who doesn't know how to talk to middle America.

But the big mistake was Barack not just giving a simple answer to Joe, “Small businesses like yours will be getting bigger tax cuts under my plan that John McCain’s plan.” That's the message of the Obama tax plan, and it somehow got lost. As a result, Barack spent about ten minutes lecturing a highly skeptical guy why it's not unfair to raise his taxes when the guy is probably in line to get a tax cut.

Here’s how it went down:

Barack: “Yes sir, what’s your name?”

Joe: “My name’s Joe Wurzelbacher.”

Barack: “Good to see you, Joe.”

Joe: "I'm getting ready to buy a company that makes about 250, 270, 280 thousand dollars a year.”

Barack: “Alright.”

Joe: “Your new tax plan is going to tax me more, isn't it?"

Barack: "Well here’s what’s going to happen. If you’re a small business which you would qualify, first off, you would get a 50% tax credit so you'd get a tax cut for your healthcare costs. So you would get a tax cut on that front.”

Joe. “Uh hm.”

Barack: “If your revenue is above 250 – then from 250 down, your taxes are going to stay the same. It is true that for say 250 up – from 250 – 300 or so -“

Joe: “But here’s my question - “

Barack: “I just want to answer your question. “

Joe: “Ok.”

Barack: “So for that additional amount, you’d go from 36 to 39%, which is what it was under Bill Clinton.“

Joe: “Yeah.”

Barack: And the reason why we’re doing that is because 95% of small businesses make less than 250. So what I want to do is give them a tax cut. I want to give all these folks who are bus drivers, teachers, auto workers who make less, I want to give them a tax cut. And so what we’re doing is, we are saying that folks who make more than 250 that that marginal amount above 250 – they’re going to be taxed at a 39 instead of a 36% rate.”

Joe: "The reason I ask you about the American dream -"

Barack: “Right, right.”

Joe: “I mean I've worked hard. I'm a plumber.”

Barack: “We appreciate it.”

Joe: “I work 10-12 hours a day.”

Barack: “Absolutely.”

Joe: “And I'm, you know, buying this company and I'm going to continue working that way. Now if I buy another truck, “

Barack: “Right.”

Joe: “And add something else to it, and build the company.”

Barack: “Right”

Joe: “You know, I'm getting taxed more and more while fulfilling the American dream."

Barack: "But, well, here's a way of thinking about it. How long have you been a plumber? How long have you been working?”

Joe: “15 years.”

Barack: “Ok, over the last 15 years, when you weren’t making 250, you would have been given a tax cut from me, so you’d actually have more money, which means you would have saved more, which means you would have gotten to the point where you could build your small business quicker than under the current tax code. So there are two ways of looking at it – I mean one way of looking at it is, now that you’ve become more successful – “

Joe: “Through hard work.”

Barack: “Through hard work – you don’t want to be taxed as much.”

Joe: “Exactly."

Barack: “Which I understand. But another way of looking at it is 95% of folks who are making less than 250, they may be working hard too – “

Joe: “Yeah.”

Barack: “But they’re being taxed at a higher rate than they would be under mine. So what I’m doing is, put yourself back 10 years ago when you were only making whatever, 60 or 70. Under my tax plan you would be keeping more of your paycheck, you’d be paying lower taxes, which means you would have saved and gotten to the point where you are faster. Now look, nobody likes high taxes."

Joe: "No, not at all."

Barack: "Of course not, but what’s happened is that we end up – we’ve cut taxes a lot for folks like me who make a lot more than 250. We haven’t given a break to folks who make less, and as a consequence, the average wage and income for ordinary folks, the vast majority of Americans, has actually gone down over the last eight years. So all I want to do is – I’ve got a tax cut. The only thing that changes, is I’m going to cut taxes a little bit more for the folks who are most in need and for the 5% of the folks who are doing very well - even though they’ve been working hard and I understand and I appreciate that – I just want to make sure they’re paying a little bit more in order to pay for those other tax cuts. Now, I respect the disagreement. I just want you to be clear – it’s not that I want to punish your success – I just want to make sure that everybody who is behind you – that they’ve got a chance at success too.”

Joe: “It seems like you would be open to a flat tax then.”

Barack: “You know, I would be open to it except here’s the problem with a flat tax is that if you actually put a flat tax together, in order for it to work and replace all the revenue that we’ve got, you’d probably end up having to make it like about a 40% sales tax. I mean that’s the value added, making it up. Now some people say 23 or 25, but in truth when you add up all the revenue that would need to be raised, you’d have to slap on a whole bunch of sales taxes on. And I do believe for folks like me who have worked hard, but frankly also been lucky –“

Joe: “Yeah.”

Barack: “I don’t mind paying just a little bit more than the waitress that I just met over there who’s things are slow and she can barely make the rent."

"My attitude is that if the economy’s good for folks from the bottom up, it’s going to be good for everybody. If you’ve got a plumbing business, you’re going to be better off. You’re going to be better off if you’ve got a whole bunch of customers who can afford to hire you, and right now everybody’s so pinched that business is bad for everybody. And I think when you spread the wealth around, it’s good for everybody."

"But listen, I respect what you do and I respect your question, and even if I don’t get your vote-“

Joe: “He he he.”

Barack: “I’m still going to be working hard on your behalf, because small businesses are what create jobs in this country and I want to encourage it.”

Joe: “Well, that’s good.”

Barack: “One other thing I didn’t mention. For small business people, I’m going to eliminate the capital gains taxes. So what it means is if your business succeeds and you take it from a $250,000 business to a $500,000 business -“

Joe: “Yeah.”

Barack: “That capital gains that you get, we’re not going to tax you on it because I want you to grow more. I’d have to look at your particular business, but you might end up paying lower taxes under my plan and my approach than under John McCain’s plan. I can’t guarantee that because I’d have to take a look at it.

Joe: “Oh yeah, I know, I understand that.”

Barack: "Thanks for your question, I appreciate it. Alright guys, I have got to get out of here and go prepare for the debate, but that was pretty good practice right there.”

So are the Democrats out there telling people how much better off Joe will be if he votes for Barack Obama? No, the response of the Democrats and the liberal media has been typical and telling. They have dug up dirt on Joe that he isn't a licensed plumber and has about $1,000 in unpaid back taxes. The not so subtle message is that Democrats don't like guys like Joe and will find a way to tax them or regulate them. Joe has gone into the Fox News camp, has appeared on the Huckabee show, and some Republicans want to draft him to run for Congress. In the latest development, someone checked the computer logs and found that some agencies in Ohio state government have been going through Joe's motor vehicle records on the state computer system.

No comments: