Much of last night's presidential debate centered on "Joe the Plumber," Joe Wurzelbacher, a plumber who Barack Obama met while campaigning in Ohio. According to the New York Times, Mr. Wurzelbacher says that he is planning to buy a plumbing business that has profits of between $250,000 and $280,000 a year. While this income would put Mr. Wurzelbacher above the threshold where he could expect to pay higher taxes under Senator Obama's tax plan, the increase in his tax bill would be relatively modest. Under Senator Obama's plan, the tax on income above $250,000 would increase by 3 percentage points from 33 percent to 36 percent. This means that Mr. Wurzelbacher could expect to see his tax bill rise by between $0-$900, assuming that this plumbing business would be his entire taxable income. If he has additional taxable income, then he would see a larger increase in his taxes. It would have been useful for reporters to explain the extent to which Joe the Plumber would see his taxes increase under Senator Obama's tax proposal. It is unlikely that this tax increase will seriously impair his plans for his business as Senator McCain implied. [Addendum: In response to a few notes, we have had far higher tax rates and much higher economic growth in years past. So, Joe might claim that he will shut his business and fire his workers if he has to pay another $900 a year in taxes, but the evidence suggests that there are plenty of other plumbers who would be happy to run the outfit even if the tax rate were somewhat higher. And, since someone asked, I have always done my own taxes. (Actually, I never found it very difficult, but I'm not trying to rip off the country.) And, I don't make a six figure salary.]
--Dean Baker
