Joe the Plumber
John McCain's "Joe the Plumber" point confused me last night and 24 hours later I still don't see the issue.
I would like to mention that a couple days ago Senator Obama was out in Ohio and he had an encounter with a guy who's a plumber, his name is Joe Wurzelbacher.
Joe wants to buy the business that he has been in for all of these years, worked 10, 12 hours a day. And he wanted to buy the business but he looked at your tax plan and he saw that he was going to pay much higher taxes.
You were going to put him in a higher tax bracket which was going to increase his taxes, which was going to cause him not to be able to employ people, which Joe was trying to realize the American dream.
Let's put aside whether he's a plumber at all and take McCain's story as told. If I understand correctly, Joe has been working in a plumbing business and he wants to buy out the current owner. Once Joe owns the business he will have an income somewhere above $200,000/yr since that's when Obama's "much higher taxes" kick in. Let's call it $250,000.
One thing that's not defined is the price that Joe will pay for the business. If the business clears $250,000 in profit every year, a typical 20x price/earnings ratio would predict that Joe's new business purchase should cost about $5 million, or maybe just $2.5 million if plumbing companies aren't valued like stock-issuing corporations. Nobody's going to just give away a company that grosses a quarter million every year.
How many plumbers have $2.5 million in the bank? Not too many, I think. (Feel free to correct me, fredtheplumber.) So Joe takes out a loan. A 30 year $2.5M loan at 5% works out to payments of around $13K per month, or $160K per year. And since paying off the loan is part of the operating expenses of the business, Joe's new company nets Joe just $90k/yr after he's done paying off the bank - well within Obama's low-tax bracket.
Of course that's assuming that Joe doesn't have $2.5 million laying around waiting to be invested in a plumbing business - and maybe he does. In which case he's somehow managed to save $156,000 every year since his 18th birthday.
I don't know a lot about plumbing, or managing a small business, or tax codes, and I'm not particularly good at math, so I might very well be wrong about everything. I'd still like to know how Joe's business purchase actually changes his tax bracket. If he can afford to buy the business it seems like he's either middle class before and middle class after or rich before and rich after.
I would like to mention that a couple days ago Senator Obama was out in Ohio and he had an encounter with a guy who's a plumber, his name is Joe Wurzelbacher.
Joe wants to buy the business that he has been in for all of these years, worked 10, 12 hours a day. And he wanted to buy the business but he looked at your tax plan and he saw that he was going to pay much higher taxes.
You were going to put him in a higher tax bracket which was going to increase his taxes, which was going to cause him not to be able to employ people, which Joe was trying to realize the American dream.
Let's put aside whether he's a plumber at all and take McCain's story as told. If I understand correctly, Joe has been working in a plumbing business and he wants to buy out the current owner. Once Joe owns the business he will have an income somewhere above $200,000/yr since that's when Obama's "much higher taxes" kick in. Let's call it $250,000.
One thing that's not defined is the price that Joe will pay for the business. If the business clears $250,000 in profit every year, a typical 20x price/earnings ratio would predict that Joe's new business purchase should cost about $5 million, or maybe just $2.5 million if plumbing companies aren't valued like stock-issuing corporations. Nobody's going to just give away a company that grosses a quarter million every year.
How many plumbers have $2.5 million in the bank? Not too many, I think. (Feel free to correct me, fredtheplumber.) So Joe takes out a loan. A 30 year $2.5M loan at 5% works out to payments of around $13K per month, or $160K per year. And since paying off the loan is part of the operating expenses of the business, Joe's new company nets Joe just $90k/yr after he's done paying off the bank - well within Obama's low-tax bracket.
Of course that's assuming that Joe doesn't have $2.5 million laying around waiting to be invested in a plumbing business - and maybe he does. In which case he's somehow managed to save $156,000 every year since his 18th birthday.
I don't know a lot about plumbing, or managing a small business, or tax codes, and I'm not particularly good at math, so I might very well be wrong about everything. I'd still like to know how Joe's business purchase actually changes his tax bracket. If he can afford to buy the business it seems like he's either middle class before and middle class after or rich before and rich after.