How Joe The Plumber makes $250,000+

[cobra de capell]

Due to the complete lack of understanding by the Media and the Obama campaign on how small business owners are taxed is driving me a bit nuts.

You hear all the "There is NO WAY Joe the plumber is ever going to make $250,000 a year!" Or any plumber for that matter...

What people need to understand is that small business owners (small C Corp, S Corp and LLC) are going to be taxed on what they take home in their paycheck AND the money that the company itself makes during the year.

Why does that matter? Because the owner is being taxed this year for money he/she leaves in the company for next year and beyond. So you are taxed for money you never really get your hands on.

For example. Joe goes into business. Hires 5 plumbers. Pays himself a tidy $125,000 a year (pretty good, and not high enough to trigger Obama's huge new taxes). "See! no problem", they say and that is where everyone stops the analysis. The trick is... The company itself goes on to take in revenue of $600,000/year. Joe's margins are good. Let's say 25%. That means the company is going to clear $150,000 for the year. Joe being a wise business owner in these times wants to keep that $150,000 in the business so he can make payroll come Jan 1 and then plan for expansion in the coming year (hire more people, buy more trucks, train his workers).

But guess what? Joe can't do that. The $150,000 the company nets goes right to his taxable income which is now reported as being $275,000 once it's combines with his take home pay for the year and he has to come up with the 35% (and going up under Obama) even though he doesn't have that other $150,000 in hand.

And oh yeah, the inflated income for Joe also means he is WAY over any threshold for the myriad of tax credits being bandied about, he can forget about that.

So what is Joe going to do? He's going to have to pull a large chuck of profit out of the business to pay his taxes for the year, reducing what he can do in the following year. All of which will be taxed at the highest possible rate. So there goes $50K of the $150K. If joe is smart he's going to keep $50K on the side for payroll/expenses/rainy day, and then if he is lucky he has $50K for expansion. Well maybe because before long he will have to make his quarterly estimated tax payments for next year... The beast has to be pre-paid ya know...

Most of the people who frequent this forum may know this information. But the morons who prop up and promote Oba Mao either do not or they are being intentionally dishonest.

The bottomline, Joe would be paying 39% at Obama’s new highest tax bracket and would not see a dime of the credits other non-business owners who get.

It's even worse....

In the video clip (BO&Joe), Joe says that he is "buying" the business. When you buy a business, normally you take out a loan and pay it back over time. Sometimes the prior owner will hold the loan.

But the tax rules say that principle paid on the loan is not deductable. Therefore, those principle payments are TAXABLE even though you never see the money!

If Joe has to pay half a million dollars for this business (very possible), and he pays it to the prior owner over 5 years (typical deal), then on average each year he pays back $100,000 in principle (less in year 1, more in year 5). He only gets a fraction of that offset by depreciation in a business like his. Most of that $100,000 counts as his income, he owes taxes on it and if Obama gets his way at a much higher tax rate.

The effect? It actually makes just about every small business worth less. Buyers will take into account the tax ramifications of buying a business. If general taxes go up, the business is worth less. PLUS: Obama will raise the cap gains rate, making all small businesses AGAIN worth less money!

The bottom line: in several different ways, Obama's tax policies make it less profitable to start, buy, or own a small business. Small businesses create 2/3 of all new jobs.

You do the math.

If BO is elected, we are all screwed.

[wtm442]

Do you really believe the $250,000 number which was picked out of the air quite a while ago will be the cornerstone of Obama's socialist wealth distribution program?

I don't think so with the economic mess currently developing.

The number will probably go down ... maybe to $150,000 or $100,000.

But everyone remember ... paying taxes is the patriotic thing to do.

[VRM]

CdC,
That model works great IF Joes income stays constant.

When business slows down does he go hire more workers and buy more trucks?

[cobra de capell]

Originally Posted by VRM

CdC,
That model works great IF Joes income stays constant.

When business slows down does he go hire more workers and buy more trucks?

Well, if it slows down to nothing, you will be buying new trucks for Joe, if BO is elected.

Now, VRM - you seem so dense - what about this picture don't you understand......

Justice will be: A CRUSHING, MCCAIN LANDSLIDE FROM COAST TO COAST!!!!!!

[cobra de capell]

Originally Posted by wtm442

Do you really believe the $250,000 number which was picked out of the air quite a while ago will be the cornerstone of Obama's socialist wealth distribution program?

I don't think so with the economic mess currently developing.

The number will probably go down ... maybe to $150,000 or $100,000.

But everyone remember ... paying taxes is the patriotic thing to do.

Oh, I don't believe the $250,000 Max - BO is out for redistribution, period. He's no doubt a socialist if not a communist. How millions can be fooled by him is beyond belief. But on the other hand, take a look at VRM's posts - he actually is considering voting for Obama and, at least according to him, he's smart!

[MChat]

If business is slow, that's all the more reason for him to keep (in the bank) more of the money rather than let the gov't take it away in taxes. That way he can keep the employees he has so that when business goes up he doesn't have to spend time looking for another worker.

Meanwhile if business slows down and the Gov't comes along and swipes his extra cash, then he has to lay off idle employees because he can't afford to keep them. Then he has to spend time and money on when business goes up to find new employees.

[cobra de capell]

Originally Posted by MChat

If business is slow, that's all the more reason for him to keep (in the bank) more of the money rather than let the gov't take it away in taxes. That way he can keep the employees he has so that when business goes up he doesn't have to spend time looking for another worker.

Meanwhile if business slows down and the Gov't comes along and swipes his extra cash, then he has to lay off idle employees because he can't afford to keep them. Then he has to spend time and money on when business goes up to find new employees.

That makes sense - rainy day fund, versus tax and spend is the route to go - too bad the federal government doesn't understand that concept.

[VRM]

Originally Posted by MChat

If business is slow, that's all the more reason for him to keep (in the bank) more of the money rather than let the gov't take it away in taxes. That way he can keep the employees he has so that when business goes up he doesn't have to spend time looking for another worker.

Meanwhile if business slows down and the Gov't comes along and swipes his extra cash, then he has to lay off idle employees because he can't afford to keep them. Then he has to spend time and money on when business goes up to find new employees.

MChat,
I don't think you know me, and I don't think I've seen you around much. Welcome.
Anyway, I'm not voting for Obama, nor am I voting for McCain. I don't want either of them running the show, but for different reasons for each one.

I do not want businesses to have to pay too much taxes either, but when business is down people get rid of employees, or cut hours. Most businesses do not hold on to employees anymore.

Remember Henry Ford? He paid his employees well enough so that they could afford the product that they made. If the Fed comes along and takes away all the earnings of the employees then nobody will be able to afford the product and Ford goes out of business. And I agree that if the Fed taxes the company too much then it will no longer be worth the effort and the company will shut down. It has to work both ways, and it has to stay balanced. The GOP pushes too far towards the companies, the DNC pushes too far towards the workers.


CdC,
I can always rely on you to answer a question with vapid hyperbole and propaganda posters. Get a clue - or do you just prefer to crib your answers from MChat? No need to answer - you already provided it. I bet you used somebody elses financial acumen to get where you are with your profession.

Steve

[MChat]

Originally Posted by VRM

MChat,
I don't think you know me, and I don't think I've seen you around much. Welcome.
Anyway, I'm not voting for Obama, nor am I voting for McCain. I don't want either of them running the show, but for different reasons for each one.

I do not want businesses to have to pay too much taxes either, but when business is down people get rid of employees, or cut hours. Most businesses do not hold on to employees anymore.

Larger (public) corporations may not hold on to employees, but small businesses usually prefer to, if at all possible. Having been on the interviewer side of things I know how difficult it is to A. find a qualified candidate that will B. actually perform the job well.

When business declines, a small business might "lay off" someone that they feel is not doing an outstanding job; but someone who is a hard worker they'll keep on board (if they can afford to) even if they don't have work for them. Because finding another qualified hard worker is difficult; hiring new employees is always a gamble.

The problem is right now, having been taxed to death for the last umpteen years, and now virtually out of control inflation (I don't believe anyone is buying that 3-4% reported by our Gov't, I certainly am not) many small businesses simply cannot afford to keep people around. But taxing them further isn't the answer either.

And I disagree with at least 60% of McCain's platform, but I disagree with 100% of Obama's. Let's just say that I'm so conservative that McCain comes off as a "Leftist" to me.

[427 S/O]

Quote MChat: A. find a qualified candidate B. actually perform the job well.


Man! that is SO true, might I suggest two more...C. Pass a drug test and D. Pass a (criminal) background check.

Finding anyone that meets those four!, is one fine individual.

[VRM]

MChat,
I'm seeing a bit of a different reality up my way (New England - North of Boston, right on the New Hampshire border).
A friend of mine works as a sheetmetal worker in NH. 3 months ago his hours were cut to 32 because the work was slowing down. His boss recently told him and the other guys that their hours would be cut to 28. Two of the other guys quit, so his hours are back up to 40, but he only expects that to last for a couple of months.
My wife and I go out most every Friday night. The places we go were usually packed, and if you were not there by 5:30 there would be a wait sometimes as long as an hour. It is not packed these days, and our favourite waitress has told us that they have also cut a few hours. People are just not spending money, and it is hurting pretty much all businesses. And I agree about inflation!

I don't like the idea of taxing businesses either, but the middle class needs the break right now more than the businesses do. If the business has customers their profits will increase even with the Fed taking a % of it. If Obamas plan had the cuts that it has now for the middle class, but did not raise taxes for anybody else I would consider voting for him. McCains tax plan will not get the economy moving again.

Steve

[Ron61]

Steve,

About the eating out. From what a woman that I keep in touch with in Ohio tells me. it is the same there. I remember when I was working and had to go back there a few times, I thought that every person in the state must eat out as you couldn't get into one of the better places with less than a 5 hour wait and better if you phoned in a reservation a day early. Now she tells me you can walk in any time and have your choice of where you want to sit. I think that is pretty common all over as there have been 5 restaurants close in the past 8 months here in this small town, and one of them had been around for almost 45 years.

Ron

[nevermind65]

All this talk about tax cuts is malarchy. It takes Congress and the President to cut taxes, and I have a feeling that no matter who is elected, that isn't going to happen soon.

Also, cutting taxes to the upper echelon (and the poor) is a waste of time. Same for cutting taxes to businesses. There s absolutely no guarantee this will trickle down to more hiring or business growth. Heck, in the last "X" amount of years, we have probably seen the opposite. Greed is the problem here.

What we need to do is cut taxes to businesses that makes it profitable for them to grow. When a business grows, they have a tendency to hire more people, make more money, and generate more tax money. For example: For the past few years, there has been a huge tax deduction to machine shops that purchased new equipment. I visit a LOT of manufacturing facilities, and probably 60% has taken advantage of this tax break. New machine sales are/were skyrocketing. New machines means new work means hiring more people. This works for capital equipment types of businesses, but the problem arises on paper shuffling businesses. We need tax cuts that generate work, not line pockets. In some cases this is synonymous, many many times it is not.

[cobra de capell]

"CdC,
I can always rely on you to answer a question with vapid hyperbole and propaganda posters. Get a clue - or do you just prefer to crib your answers from MChat? No need to answer - you already provided it. I bet you used somebody elses financial acumen to get where you are with your profession."

First, You sure can.

Second - I did, it's called education and training on this planet!

So, you are not voting at all? I've got some words in response to that, but I don't want to be banned, at least not today.

Perhaps you don't realize that life is all about compromising - one can have anything they want, but not everything they want - clearly you and millions of other people cannot seem to grasp that simple concept - on the other hand, 50% of us are lower average so there is an explanation.

McCain-Palin are far from perfect with perfect being me and practically anyone else. Obama doesn't even come close to being qualified as the leader of the free world. It's sad that you don't understand how to sort out the choices. Actually, I'm a little worried about you, get some help.

[MChat]

Originally Posted by VRM

I don't like the idea of taxing businesses either, but the middle class needs the break right now more than the businesses do. If the business has customers their profits will increase even with the Fed taking a % of it. If Obamas plan had the cuts that it has now for the middle class, but did not raise taxes for anybody else I would consider voting for him. McCains tax plan will not get the economy moving again.

Steve

I got a better idea: How about the Gov't stop spending so much money. We could start by not giving foreign aid to countries that hate us. Stop requiring States to "use or lose" Federal dollars (let unused $$$ come back to the Fed without affecting next years state alotment).

[cobra de capell]

Originally Posted by VRM

MChat,
I don't think you know me, and I don't think I've seen you around much. Welcome.
Anyway, I'm not voting for Obama, nor am I voting for McCain. I don't want either of them running the show, but for different reasons for each one.

I do not want businesses to have to pay too much taxes either, but when business is down people get rid of employees, or cut hours. Most businesses do not hold on to employees anymore.

Remember Henry Ford? He paid his employees well enough so that they could afford the product that they made. If the Fed comes along and takes away all the earnings of the employees then nobody will be able to afford the product and Ford goes out of business. And I agree that if the Fed taxes the company too much then it will no longer be worth the effort and the company will shut down. It has to work both ways, and it has to stay balanced. The GOP pushes too far towards the companies, the DNC pushes too far towards the workers.


CdC,
I can always rely on you to answer a question with vapid hyperbole and propaganda posters. Get a clue - or do you just prefer to crib your answers from MChat? No need to answer - you already provided it. I bet you used somebody elses financial acumen to get where you are with your profession.

Steve

Originally Posted by MChat

I got a better idea: How about the Gov't stop spending so much money. We could start by not giving foreign aid to countries that hate us. Stop requiring States to "use or lose" Federal dollars (let unused $$$ come back to the Fed without affecting next years state alotment).

OK, so which set of candidates is more likely to 'save' dollars or not spend dollars? This is really a no-brainer for most fully human beings.

[VRM]

Originally Posted by MChat

I got a better idea: How about the Gov't stop spending so much money. We could start by not giving foreign aid to countries that hate us. Stop requiring States to "use or lose" Federal dollars (let unused $$$ come back to the Fed without affecting next years state alotment).

Yep, I agree with that. I think McCain will do a better job there than Obama, but I still do not think McCain will do a good job. I think he will cut a few things here and there, but it will mostly be business as usual.
BTW, I'm voting for Ron Paul - he would do a much better job than either Obama or McCain. Yeah, he is a little shrill, and does not always present well, but so far he is the only guy I have even a shred of respect for. And his record bears out his desire for small government and small taxes.

Steve

[cobra de capell]

Don’t bother voting for one of the 3rd party guys or writing in some obscure name. Why waste the effort? Just go on out in your backyard and dig a hole and crawl into it. The rest of us will take care of the heavy lifting.

Principle is principle.

Politics is politics.

Please try not to get them confused.

They have nothing to do with each other.

[MChat]

Originally Posted by VRM

BTW, I'm voting for Ron Paul - he would do a much better job than either Obama or McCain. Yeah, he is a little shrill, and does not always present well, but so far he is the only guy I have even a shred of respect for. And his record bears out his desire for small government and small taxes.

Steve

As conservative as I am, you might be surprised to know that I've voted for 3rd party candidates (usually libertarian*) for 3 of the last 4 elections. The reason, for me, is simple. The Republican party no longer seems to want to represent conservatives. The Rep party is catering to the centrists while the Dems go after the far left. Give me a strong conservative party that'll fight to put this country back on the right track.

It has been my luxury to vote 3rd party in the past as I live in a primarily Republican state (AZ); I'm not so sure that's the case anymore. If everyone who didn't like either of the 2 major candiates actually voted 3rd party, then we'd have an honest chance. But thanks to our "don't throw your vote away" media that's not going to happen; the media knows how to manipulate the sheeple.

*Although the libertarian platform has some planks I don't agree with, they're the biggest party that is for Individual Responsibility and Smaller Government. Two things we desperately need in this country.

My position is that the GOVERNment's job is to GOVERN (hence the name). If it were meant to PROVIDE (as the left wants) it would have been called a PROVIDERment. The Government's job is defense and justice. That is to defend against foreign attack (this also includes foreign relations/policy) and to judge & punish wrong-doers (and in the case of our Federal Gov't to settle disputes between states). It is the Church's responsibility to provide charity, not the governments. It's the individual's job to provide for his family and his future (retirement).

[VRM]

Originally Posted by cobra de capell

Don’t bother voting for one of the 3rd party guys or writing in some obscure name. Why waste the effort? Just go on out in your backyard and dig a hole and crawl into it. The rest of us will take care of the heavy lifting.

Principle is principle.

Politics is politics.

Please try not to get them confused.

They have nothing to do with each other.

CdC,
You are willing to settle for less than mediocrity (hell, you even ADVOCATE IT!!); I am not. You and others like you have dug a hole and you are tying to pull the rest of the country in while those in the DNC try to pull the country into a different hole. Feel free to stay in there yourself (I DO favour of individual rights, after all), but leave me out of it. I am not interested in putting myself into any hole that you already seem to have stuck your head into.


MChat,
I'm not at all surprised that you often vote 3rd party. Any true conservative or classical liberal (like Jefferson) have a lot more in common with Libertatians than with either the DNC or the GOP.

Just curious - which planks of the Libertarian platform do you disagree with? I already have a guess, but I would rather ask than assume.

Steve