Business tax help for Joe the Plumber
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Business tax help for Joe the Plumber

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  #1  
Old 10-24-2008, 09:16 AM
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Business tax help for Joe the Plumber

Dear Joe the Plumber: if you wind up paying more taxes, you’re an idiot.





Dear Joe the Plumber,

Welcome to your 15 minutes of fame. It’s not everyone who gets his name mentioned 286 times in a presidential debate. If you haven’t already, you simply must change your business’s name to Joe the Plumber. That’s just good marketing. Oh, and don’t forget to add the tag line, “As seen on TV!”
OK, Joe, so you had a conversation with Barack Obama and, while media reports are very sketchy about exactly what your circumstances are (not surprising), it appears you want to buy a business that “brings in” more than $250,000. I have yet to find out if “brings in” means $250,000 in revenue or profit (a very important distinction, Joe), but let’s assume for a moment that it’s profit we’re talking about. Under Barack Obama’s plan (as sketchy as it is on his website), a good guess would be that you would go into a higher tax bracket, paying about 3.6% more in taxes on every dollar you earn over $250,000, for a total marginal tax rate of 39.6% — exactly the same as it was in the 1990s.
But let’s take a closer look at your situation, shall we Joe?
You say you’re planning to buy this business, and it must be a very large small business, indeed, if it covers salaries, expenses, trucks, inventory and the like and still yields a $250,000 + profit. I’m going to guess that you don’t have the cash to buy this business outright, Joe, and if you do, I think you’re holding back on us. I think you’ve inherited some money. But let’s assume that you’re borrowing a fair amount of money to buy the business, using its book value (what the business is worth if you sold all the assets and paid off all your debts) as security and using the revenue stream to pay off the loan. Let’s also assume a business this size is incorporated.
Here’s what you do, Joe. First off, you have your corporation pay you a salary of, say, $249,000 per year. Now you’re not in the higher marginal tax bracket, right? Payments on the loan you took out to buy the business are fully tax deductible, so profits will be reduced by that amount. If you still have more than $250,000 in profit, we’re talking about a rather large business here, and probably a very large down payment (which suggests that you can manipulate your down payment to reduce your taxes, doesn’t it?)
But here’s the thing, Joe. When you own a business, you can do all kinds of things to reduce taxable income (profit). For instance, you can buy more equipment, which can then be depreciated over the years, providing a tax deduction and increasing the company’s book value and, thus, your wealth. Even fully depreciated equipment can generally be sold, in the future, for something. You can spend more money on advertising and hire on a new plumber or two. The advertising costs and the employment costs are generally fully tax deductible. Well, let me take that back. If you provide your employees with health insurance, your costs for health insurance won’t be tax deductible under John McCain’s plan, but who’s counting, right?
By advertising and hiring on, you can drastically increase your revenues (the amount of money coming in) while keeping profits below the $250,000 mark. The increased revenues will make the resale value of your business much higher than it already is, increasing your wealth without getting taxed on that increase. If you want to take more wealth out right now without paying taxes, there is a cornucopia of tax-free or tax-deferred retirement options, benefits, and the like that can move money right around the IRS’s outstretched palm.
Eventually, Joe, your company will be so large, and you will be so wealthy, than an extra 3.5 pennies in tax on each dollar on income you earn over $250,000 will be chickenfeed to you (if it isn’t already). But, hey, it’s up to you. Increase the underlying wealth in your company without paying taxes, or take cash now and pay a few additional taxes on it.
But, please, don’t complain to me about paying more taxes. All it says to me is that you’re not smart enough to run your business’s financial side.
All the best to you and yours,
JS O’Brien
UPDATE
It turns out that Joe is not a good businessman for a simple reason: He doesn’t own a business, appears to have no immediate prospects to do so, has no plumber’s license, works for a small firm doing residential work (which means his employer is unlikely to be clearing $250k per year), and has occasionally talked to the owner about buying the business — someday.
Poor Joe. He’s about to get ripped to shreds by the media, and he seems like a pretty decent guy. I feel for him.
On the other hand, Joe is a great example of those who are so terrified that they’ll get rich some day and owe an extra 3.5 cents on every dollar over $250,000 that they spend a lot of time worrying about it. Joe doesn’t know that he is unlikely ever to make that kind of money.
UPDATE #2
It just gets better and better. Bloomberg is reporting that Joe owes around $1200 in back taxes, and there is an Ohio lien filed against him.
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  #2  
Old 10-24-2008, 10:27 AM
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Re: Business tax help for Joe the Plumber

LOL....
I posted something along these same lines the other day Bing, and I am sure there are not that many toilets (250K?) that need unclogging in Ohio....

from the link in your post....
When Joe the Plumber met McCain the loose cannon, Joe got crushed



I feel really bad for Samuel Joseph Wurzelbacher, aka “Joe the Plumber.” Here is a guy, minding his own business, playing football on his front lawn with his 13-year-old son, when he looks up and sees a candidate for president walking down his street. This particular candidate is tall, well-spoken, extraordinarily well-educated, accomplished, and black. Joe is a Republican, so he figures he’ll confront a Democrat he doesn’t much care for. He goes over to him and … well … embellishes a little bit, as we are all wont to do on occasion. He tells the candidate he’s trying to buy a business that brings in more than $250,000 a year, and that would mean he would have to pay more taxes, wouldn’t it? The candidate probably should have probed Joe a bit about whether he meant that the business charged a total of $250,000 or whether that was the profit, but he probably figured that Joe was a businessman and didn’t want to insult his intelligence. So, the candidate from Chicago told him it would, but that tax savings for those earning less than he does would benefit others who could then afford his services more easily, meaning he could make more money from getting them as customers in a Keynesian “spreading the wealth around.”
Joe’s encounter with Senator Obama was duly reported in the media, and as befits the news cycle in this time of rapid change, quickly forgotten.
Except by John McCain and his campaign staff.
McCain, you see, had a tough debate coming up soon, and he thought that Joe’s story and Obama’s “spread the wealth” comment could be used to advantage, so he went to the debate and constantly brought up Joe’s name in an attempt to hammer Obama on tax fairness, making the point that if a plumber who had worked so hard and earned enough to buy a business could be hurt by Obama’s tax plan, then so could other ordinary Americans.
There was just one problem: Joe wasn’t exactly who and what he said he was, and the media quickly found out about it and published what they found.
It turns out that Joe is not a licensed plumber and has never gone through any plumbing courses, which makes his work in Ohio illegal. His employer has a license, but not to do work in Joe’s county. Uh oh. Joe also owes nearly $1,200 in back taxes and there’s a lien on his property. He almost certainly doesn’t have the money to buy a business (his last public report of income was only $40,000), doesn’t really know much about business, and if the business he’s dreaming of buying (his boss’s) earns $250,000+ as he says, it must be the only two-man plumbing business in the world to do so. And, there’s an outside chance that Joe is related to Charles Keating’s son in law. Charles Keating is the swindler John McCain got entangled with that earned McCain a reprimand from the Senate Ethics Committee.
So where does this leave Joe? Well, he’ll almost certainly be told to cease and desist working as a plumber until he gets a license. The tax people will come after him. His employer is bound to be angry. He’s about to become a national laughingstock. There’s a good chance that all those TV interviews people have been wanting will be canceled. Joe is about to lose his livelihood, his good name, and his dignity.
And what about John McCain? Well, he’s not only crushed Joe with his maverickness loose cannon-ness, he’s also made himself look like a fool for running with a story that turns out to be just another Republican fairy tale (see “Reagan, welfare queen, the”).
And this is the overarching reason why Americans should run screaming from John McCain.
I can imagine that carrier jet pilots need quick reactions and must sometimes make split-second decisions. I’m sure John McCain’s willingness to make those quick decisions was very useful to him in wrecking three aircraft. But who earth wants a president who makes snap judgments on complex issues? Do we really want a man who plays Lone Ranger, parachuting into delicate legislative negotiations to “fix” things, only to exit stage right (Heavens to Murgatroid) on a whim for a debate after those negotiations fall apart? Do we really want a guy who makes a snap judgment on a running mate, and gives us a woman who is undereducated, underexperienced, underbrained, undercurious, and under Todd Palin (surely Paris Hilton has better taste)? A woman who has spent enough time in beauty pageants and being a television sports announcer to give a professional look on camera, but who is stumped by that most difficult of questions: “What publications do you read?” Do we want a man who lurches from one campaign message to another every 32 seconds, hoping something, anything, will resonate?
This time, John McCain hurt only Joe the Plumber with his impulsive behavior. Give him the reins of the executive branch, and there’s no end to the damage he can do. We should know, shouldn’t we? “Fire, ready, aim” has been the motto of the White House for eight long years.
And it’s been a great ride, hasn’t it?
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  #3  
Old 10-24-2008, 12:22 PM
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Re: Business tax help for Joe the Plumber

As if Joe's background makes the Obama response any better, not. Keep on keeping on however ...
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Old 10-24-2008, 12:30 PM
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Re: Business tax help for Joe the Plumber

Quote:
Originally Posted by M.Opaliski View Post
As if Joe's background makes the Obama response any better, not. Keep on keeping on however ...
Obamas response is not what I'm looking at here, and I am sure many others are not looking at either.....

M.O. please reread the post I made, and see that he's a nobody doing illegal work, and will not make anywhere close to 250K in the field he is ILLEGALLY working in.....

The man ran his mouth, when he was on TV, and now he's paying for it....
out a job, has to put out money for a license, all the while knowing that he ws not going to do anything but attempt to make an ass out of someone......

all the while that someone......
WAS HIMSELF!
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  #5  
Old 10-24-2008, 12:41 PM
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Re: Business tax help for Joe the Plumber

Quote:
Originally Posted by 19720 View Post
Obamas response is not what I'm looking at here, and I am sure many others are not looking at either.....

M.O. please reread the post I made, and see that he's a nobody doing illegal work, and will not make anywhere close to 250K in the field he is ILLEGALLY working in.....

The man ran his mouth, when he was on TV, and now he's paying for it....
out a job, has to put out money for a license, all the while knowing that he ws not going to do anything but attempt to make an ass out of someone......

all the while that someone......
WAS HIMSELF!
A prime example of "be careful what you wish for, you just might get it".

When you shine a light on someone else, it also displays your own sins.
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  #6  
Old 10-24-2008, 05:50 PM
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Exclamation Re: Business tax help for Joe the Plumber

I couldn't care less if he was dubbed 'Joe the Murderer' because his occupation was 'Painting Houses', his background to me is meaningless because I just don't care about Joe the guy, Joe isn't the issue unless you need to make Joe the issue. I don't ...
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