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ECONOMY

The Myth Of ‘Joe The Plumber’

Last weekend, Sen. Barack Obama (D-IL) visited a quiet neighborhood outside Toledo, OH, and ran into a man named Samuel J. Wurzelbacher. Wurzelbacher, known as “Joe,” asked Obama if he believed in the American Dream and expressed his concern about having to pay higher taxes should he fulfill his desire to own a small plumbing business. ”I’m getting ready to buy a company that makes $250,000 to $280,000 a year,” he told Obama. ”Your new tax plan is going to tax me more, isn’t it?” Obama explained that his tax plan is premised on the idea that “if the economy’s good for folks from the bottom up, it’s gonna be good for everybody. If you’ve got a plumbing business, you’re going to be better off if you’ve got a whole bunch of customers who can afford to hire you.” Obama then added, “I think when you spread the wealth around, it’s good for everybody.” Wurzelbacher became an instant conservative hero. Right-wing media immediately latched on to him — who called Obama’s economic plan “socialist” — and Sen. John McCain (R-AZ) quickly jumped on the bandwagon, lionizing “Joe the Plumber” in the final presidential debate last Wednesday. “What you want to do to Joe the Plumber and millions more like him is have their taxes increased and not be able to realize the American Dream of owning their own business,” McCain said to Obama. But the reality is far different. In fact, a progressive tax policy is exactly how “millions” like “Joe the Plumber” can realize the American Dream — a concept that McCain once understood years ago.

PROGRESSIVE TAX POLICY: President Bill Clinton decided early in his term in office that expanding the middle class — not tax cuts for the rich — would be the engine of economic growth, while his successor, President George W. Bush, argued the opposite. But the as the results have shown, a progressive tax policy enacted by President Clinton achieved far superior results for the economy. By the end of Clinton’s second term, unemployment stood at very low 3.9 percent while today it has risen over 6 percent. The poverty rate was lower in 2000 than it is today. The median household income (adjusted for inflation) was over $3,000 higher eight years ago. Bush inherited a $237 billion federal budget surplus, which he has turned into a $482 billion deficit (and growing fast). Building on this formula, the Center for American Progresss put forward a progressive, “comprehensive tax reform plan to restore fairness, simplicity, and opportunity to our tax system while generating the resources necessary to meet our nation’s commitments,” such as energy independence, education, and health care. In order to achieve these goals, the plan centers on increasing the take-home pay of those making under $200,000 a year, with those making more seeing an increase relative to the current tax policy.

THE REAL ‘JOE THE PLUMBER’: Earlier this week, Fox News’s Neil Cavuto summarized the right wing’s fascination with Wurzelbacher. “You’re the type of guy who these tax increases of [Obama's] could affect, or where the cut-off is could effect, and you don’t fit this gazillionaire model,” Cavuto told him during an interview.  But according to tax analysts, the problem for McCain and the right in focusing on Joe the Plumber is that “the underlying premise that Wurzelbacher would face higher taxes under Obama is neither true nor typical of how the vast majority of small businesses would fare.” Moreover, even if Wurzelbacher buys the business, it is “unlikely” that his purchase “would give him a taxable income of more than $200,000 — leaving him unaffected by Obama’s proposal.” Even if he did earn $280,000 per year as he projected he might, Wurzelbacher “would pay just $773 more in taxes under Obama’s plan than McCain’s,” hardly a crippling blow to his business. The Toledo Blade reports that Joe the Plumber currently earns well under $100,000 per year. In that case, he would save more under Obama’s plan than McCain’s. “Rather than a game-changing blow for the McCain campaign, ‘Joe the plumber’ is turning into a bad case of blowback,” said Rogan Kersh, a public service professor at New York University.

HELPING BUSINESSES THROUGH HEALTH CARE: Many critics have argued that letting Bush’s tax cuts for the top two marginal income tax rates expire would have an adverse affect on small businesses such as Wurzelbacher’s potential future plumbing company. But according to the Center on Budget and Policy Priorities, “only 1.9 percent of filers with any small-business income are projected to face either of the top two income tax rates in 2009.” The rising cost of health care is making it harder for small businesses to grow and create jobs. In fact, Wurzelbacher himself has experienced the the high cost of health care. St. Charles Mercy Hospital filed a lien against him in March 2007 by for $1,261, records show, although it has since been paid off. Currently, many small businesses are overwhelmed by health care costs. They either “pay the overblown and disproportionate costs in purchasing and administering a health care plan or, worse, offer no health care plan at all and suffer the competitive disadvantage in attracting and retaining talented labor.” But a progressive tax policy will allow the government to invest in health care reform, thus providing help to small businesses by expanding coverage for their employees and relieving employers of the burden.