Alex Taylor Column December 26, 2009
Campaign season fuels fires of rich vs. poor
Last week I wrote of the demise of good English in favor of the rise of presidential campaign lingo — much of which makes virtually no sense. If I had just waited a day or two, I would have had a great addition to this election’s list of funny campaign marketing tools — “Joe the Plumber.”
Joe certainly got his 15 minutes — make it 5 days — of fame when he quizzed Obama on the candidate’s plans for taxing people like himself — aspiring middle-class business owners. As it turns out, Joe’s boss didn’t know his employee intended to take over the plumbing business, nor did Joe realize he didn’t have a high enough salary (and probably shouldn’t count on that big raise) to make it happen.
What the encounter did show, however, is a good example of how populist politicians often despise “rich” people.
Joe the Plumber’s spotlight came on just as the country was reeling from stories of corporate excess on Wall Street. The atmosphere was ripe for old-fashioned class warfare. I believe, unfortunately, that there is a lot more of that to come in what may be the next administration.
Richard Fuld, the head of the former Wall Street giant, Lehman Brothers, has rejuvenated the loathing for villainous, rich, robber-baron businessmen. He’s replaced the faces of the Enron executive suite as examples of greed and excess.
On a much smaller scale, Joe the Plumber was derided by Obama for complaining about an increase in taxes on people like him: “How many plumbers do you know making $250,000 a year?” he asked to his cheering crowds. That makes Joe the Plumber look like yet another example of greed and excess.
But if you listen to Joe and Obama’s discussion, you’ll find it’s just rhetoric to mask a dislike of people perceived as having money. At times like this, there’s a lot of people who want that money, and Obama promises to give it to them — to “spread the wealth around.” That may sound good, but let’s take a look at why it might not work out well for the average person.
In Obama’s discussion with Joe (which is available on YouTube), he says that the higher tax rate on the “rich” doesn’t kick in until your annual revenues exceed $250,000.
Revenues. To anyone who doesn’t run a business, revenues are just one component of annual operation. Expenses are another — things like plungers, tools, employees, whatever it takes to run a plumbing business (in Joe’s case). Whatever you have left after all that, and after taxes are paid, is considered net income.
The average profit margin for U.S. businesses peaked a couple of years ago around 8.5 percent. That would mean that on revenues of $250,000, Joe the Plumber would have $21,250 for himself at the end of the day. That hardly makes him “rich,” but because his hoped-for “revenues” exceeded $250,000, Obama derided Joe as a plumber “making” $250,000 a year. That makes him fair game to the average Joe out there who doesn’t like “rich people.”
There’s a big difference between revenues and earnings. Most of us big bad business people — as Joe hopes to be — aren’t as “rich” as the populist masses might believe.
This isn’t an argument I’m going to win these days. Most Americans have seen 30 percent to 40 percent of their net worth or retirement savings vanish in the past two months and, as long as taxes go up on someone other than themselves, that’s fine.
It all sounds like a good idea when you need more money. But take it from someone who runs a business with hundreds of employees: You don’t want your company burdened with higher taxes. It results in less money available to spend on your computer station, marketing for your big initiative, or worst case, on payroll.
So, no matter who takes over in two weeks, let’s hope that this sentiment of getting money “off of Wall Street and onto Main Street” doesn’t get misconstrued as tax “the rich” and pay the poor. Never has Joe the Plumber been more afraid of being labelled “rich.”