Thursday, October 16, 2008

Joe-the-Plumber Demonstrates Business and Tax Ignorance in America

I am not picking on "Joe the Plumber", though I need to start with this very current and in-your-face example that both candidates used in yesterday's presidential debate (quote from Fox news article link above):
Joe Wurzelbacher, 34, told Obama that he was preparing to buy the plumbing company he works for, and that its revenues come to more than $250,000 a year.
Does everyone realize how sad it is that people do not understand the difference between REVENUE and INCOME?! There is no income tax plan in America (whether presented by a Democrat or Republican) that sets tax threshold based on *revenue* of a company.

I could not believe it when Obama did not jump right on this fact and clearly say something like, "you know John (McCain), nobody is proposing taxing revenue, but rather *income*. It is only the business *income* that matters, and I will only increase taxes on the *income* over $250K/year. And, nobody is taxing a purchase of a business either, so the purchase price is irrelevant (except for the seller, who is presumably getting a favorable cap-gains rate already)." But, Obama and McCain, like most Americans, obviously lack the understanding of our current tax-code, even as they propose changes to it to improve it.

In addition, people incorrectly seem to think that if a tax-rate increase goes into effect for >$250K earnings that it raises taxes on dollars #1 through #250K, which is NOT the case. Our tax-tiers are additive bands, and the money earned in each "band" is taxed at that band's rate and that rate only, and have always been so. I.e., even if you make $300K, and taxes are raised by 3% on any income over $250K, you are paying 3% on the 50K beyond that 250K threshold, which is $1500/year. You are NOT paying 3% more on the entire 300K. No tax plan EVER has implemented such a thing. Again, I fault Obama for not pointing this out CLEARLY to everyone so as to dismiss the McCain fear-factor approach regarding Obama's plan to raise taxes on the income earned that EXCEEDS the $250K threshold, and ONLY on that amount. This is simply trying to return tax-band-rates on the upper-most tax-bands to rates similar to the Clinton era (which, if you noticed, we experienced a prolonged economic expansion during such times, and had much smaller deficits - it surely did not punish business or job-creation!)

American ignorance (in general) when it comes to understanding business and taxes is sad. It should be a requirement that we ALL learn about how a small business operation works, and about income taxes and how they are structured, so we know the basics. This should be a high-school class. The basics can be learned in just a couple weeks. And, it needs to be taught without regard to politics: we do not need teachers saying that either the Democrat's or Republican's version of taxation is "better" or "more fair" or whatever. Let people learn the tax code, and about how revenues, expenses, tax-credits, incentives, and all that come into play, and how it is net-profit (i.e., income) that is what matters most when it comes to taxation at a Federal level.

But, for now, the average American remains absolutely clueless with regards to taxes (in general), and especially in regards to taxes as they apply to small businesses. As such, John McCain can use the fear of taxes as a weapon against Barack Obama. And, because Barack seems to not command the details behind our tax-code, he is ill-equiped to stave off these attacks even though doing so should be SIMPLE.

Out candidates both prove that THEY are clueless in the matters of business and taxation, especially in regards to the "little guy"... they talk about education in America, but show they have no knowledge of how business and finance work for most of America. So, please candidates, get on the ball. I doubt John McCain really cares to learn (since his policies target large business and the absolute upper-few percent of incomes more than anything), but certainly Obama should be able to get some people onboard with his campaign to help him counter the fear/scare tactics of McCain. Talk to me Barack, I will GLADLY help your campaign with small-business issues... I own a few small businesses, and have for many years. I understand this all rather well, and can help explain to others that your plan really is not going to hurt small business AT ALL.

Sure, you have Warren Buffet and Robert Rubin as advisers, but you need someone that also represents the "small guy", the small business owner, and the concerns of the average American business owner. I will join your advisory board, and I do not expect compensation. I will make the same offer to McCain, but I really do not believe his interests lie in helping those that make less than $250K/year (income! not revenue people... income!), and as such, this would exclude 98% of small businesses from his target audience (though he surely has tried to scare ALL small business by misrepresenting tax-code and Obama's tax plan).

And, I have not even started on how insanely stupid McCain's health-care proposal is... he is incentivising me to drop the health-care plan I currently offer my employees and sticking my employees with the burden of acquiring healthcare for themselves at (I guarantee) a MUCH higher price than what I, as a business owner, get group-rates for. But, that is another issue.

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