Spreading the wealth around...

[Anonymous]

Does anyone worry that the Joe the Plumber encounter where Obama replied that he believes in "spreading the wealth around" will get some traction and tighten the race?

[jsteele]

Anonymous wrote:Does anyone worry that the Joe the Plumber encounter where Obama replied that he believes in "spreading the wealth around" will get some traction and tighten the race?

No. Joe doesn't make $250,000. Someone else's wealth will be spread to him, so he will be happy.

[Anonymous]

Small businesses (Schedule C or Subchapter S) don't have 'retained earnings' to use for operating capital. All money that comes in is taxed as income in the current year. That is why a profitable small business resorts to tricks such a pre-payment of rent, maintenance services, insurance, etc. in December to lower the 'income'.

All small businesses need some capital in the bank to keep things going. It isn't income in the sense that your paycheck it - there are often future demands on that money such as carrying employee salaries in a month when revenues are off, etc.

I started a small biz years ago and I now employ 12 people. Our revenues are in the $2M range - not huge but definitely more than $250K. Gross profits after expenses are about 20% - I am proud of that. We plow quite a bit of that back into occasional capital expenses (servers, telephone systems), software development projects, new marketing programs (planning to hire a new sales person in the spring). I of course pay myself too, and believe me there were a few years there where that didn't or barely happened! Every $$ that the government takes in taxes to 'spread around to others' delays or cancels those future plans.

It's not just law firm partners, corporate executives, and software wizzards that are going to have their income spread around, it is Joe the Plumber.

[Anonymous]

But is the percentage that Obama uses correct? He says 95% of people make under $250k and that 98% of businesses make under $250k. Is that true?

[Anonymous]

There is no way at all that 98% of businesses make less than $250K. That's ludicrous.

The thing is, we as individuals DO "spread the wealth around." Every time we buy something, choose someone to do a service for us, or donate to a charity, we spread the wealth as we see fit. I don't get why so many people think it would be better to give the government more of our money so that THEY can decide how to spread money around. So much of the money would be lost just in the transfer.

[Anonymous]

Anonymous wrote:But is the percentage that Obama uses correct? He says 95% of people make under $250k and that 98% of businesses make under $250k. Is that true?

Go to the census site... I checked the numbers and 95% of households do make under 250k
households though, not people.

[jsteele]

Anonymous wrote:Small businesses (Schedule C or Subchapter S) don't have 'retained earnings' to use for operating capital. All money that comes in is taxed as income in the current year. That is why a profitable small business resorts to tricks such a pre-payment of rent, maintenance services, insurance, etc. in December to lower the 'income'.

All small businesses need some capital in the bank to keep things going. It isn't income in the sense that your paycheck it - there are often future demands on that money such as carrying employee salaries in a month when revenues are off, etc.

I started a small biz years ago and I now employ 12 people. Our revenues are in the $2M range - not huge but definitely more than $250K. Gross profits after expenses are about 20% - I am proud of that. We plow quite a bit of that back into occasional capital expenses (servers, telephone systems), software development projects, new marketing programs (planning to hire a new sales person in the spring). I of course pay myself too, and believe me there were a few years there where that didn't or barely happened! Every $$ that the government takes in taxes to 'spread around to others' delays or cancels those future plans.

It's not just law firm partners, corporate executives, and software wizzards that are going to have their income spread around, it is Joe the Plumber.

Joe doesn't earn $250,000. He said that on TV last night.

As for your situation, I believe you may not be considering that the tax is on AGI. Unless your adjusted gross income is over $250,000 you won't have a problem either. In fact, you will probably benefit from other credits Obama plans.

Obama has also proposed a tax credit for small businesses that create jobs. So, if you want to hire a new employee in the Spring, you would be eligible for that as well.

[Anonymous]

Obama has also proposed a tax credit for small businesses that create jobs. So, if you want to hire a new employee in the Spring, you would be eligible for that as well.

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I cannot find details on this - can you?

[Anonymous]

Anonymous wrote:But is the percentage that Obama uses correct? He says 95% of people make under $250k and that 98% of businesses make under $250k. Is that true?

Probably technically, because if you sell Mary Kay, Tupperware, Tastefully Simple, Pampered Chef, etc. you are a small business.

The small businesses who make over $250K though are the ones that create jobs. Taking more money from them to spread around means less job creation.

You know there are lies, damn lies, and statistics. You can parse a statistic any way you want to make a point. Both Obama and McCain use small business statistics to make their points. Yes, small business is where the job creation has been. And yes, most small businesses but sheer numbers are really really small.

[jsteele]

Anonymous wrote:
I cannot find details on this - can you?

It was part of a speech Obama gave on Oct. 13. The entire text is here:

But here is the relevant passage:

We've already lost three-quarters of a million jobs this year, and some experts say that unemployment may rise to 8% by the end of next year. We can't wait until then to start creating new jobs. That's why I'm proposing to give our businesses a new American jobs tax credit for each new employee they hire here in the United States over the next two years.

To fuel the real engine of job creation in this country, I've also proposed eliminating all capital gains taxes on investments in small businesses and start-up companies, and I've proposed an additional tax incentive through next year to encourage new small business investment. It is time to protect the jobs we have and to create the jobs of tomorrow by unlocking the drive, and ingenuity, and innovation of the American people.

Of course the obvious question -- to which I unfortunately don't know the answer -- is how much is the tax credit.

[Anonymous]

I think the point is that "Joe the Plumber" wants to own the company and expand it and be part of the over $250k class. However, with Obama's plan this will be harder.

I have a sub-chapter S and Obama's plan will probably force me to reorganize or simply close it down.

[jsteele]

Anonymous wrote:I think the point is that "Joe the Plumber" wants to own the company and expand it and be part of the over $250k class. However, with Obama's plan this will be harder.

I have a sub-chapter S and Obama's plan will probably force me to reorganize or simply close it down.

I don't know about your situation, but it seems that Joe the Plumber simply didn't know what he was talking about. Currently, he makes less that $250,000 so under Obama's plan, he will get a tax cut, not a tax increase. As a result, he will actually have more money, not less, with which to purchase a business. According to what Joe told ABC News, he wants to buy a business at a cost of $250,000 - $280,000. Since I doubt the business will have 100% return over the first year, he will likely continue making less than $250,000 for the foreseeable future and will be paying the lower tax rate Obama proposes.

I've always been amazed at the ability of Republicans to convince people to vote against their own interests. This looks like a case in point.

[Anonymous]

Anonymous wrote:I think the point is that "Joe the Plumber" wants to own the company and expand it and be part of the over $250k class. However, with Obama's plan this will be harder.

I have a sub-chapter S and Obama's plan will probably force me to reorganize or simply close it down.

Me too - I don't know which is worse, the higher accounting fees with the reorg or the higher taxes. (I won't shut down) I know that people who only sign the back of their paycheck don't get it either, which is annoying.

[Anonymous]

Anonymous wrote:There is no way at all that 98% of businesses make less than $250K. That's ludicrous.

The thing is, we as individuals DO "spread the wealth around." Every time we buy something, choose someone to do a service for us, or donate to a charity, we spread the wealth as we see fit. I don't get why so many people think it would be better to give the government more of our money so that THEY can decide how to spread money around. So much of the money would be lost just in the transfer.

It's not ludicrous, although I cannot demonstrate that 98% is the exact number. Remember, these numbers are on profit, not revenue.

[Anonymous]

Anonymous wrote:I think the point is that "Joe the Plumber" wants to own the company and expand it and be part of the over $250k class. However, with Obama's plan this will be harder.

I have a sub-chapter S and Obama's plan will probably force me to reorganize or simply close it down.

Do you mean that because of the tax change it is no longer feasible for you to stay in business, or that you will simply do an LLC and continue? I have been working on the math myself, and I cannot see how this is going to actually cause someone to stop running a business. At worst, you will pay more in taxes, but you would be far worse off not doing the business.