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Obama Tax May Not Hit 'Joe The Plumber' Hard

MICHELE NORRIS, host:

If you watched the debate, you heard one name over and over and over again, Joe the plumber. It all started when Joe recently grilled Barack Obama at a campaign stop about how Obama's tax plan would affect him. At the debate, McCain claimed his tax proposal would be more favorable to Joe. Here's NPR's John Ydstie to set the record straight about what each candidate's plans would do for the suddenly famous Ohio plumber.

JOHN YDSTIE: Joe Wurzelbacher's 15 minutes of fame began this weekend, when he buttonholed Senator Obama during the candidate's visit to his neighborhood near Toledo. The moment was captured on video and posted on YouTube.

Mr. JOE WURZELBACHER (Joe the Plumber): My name is Joe Wurzelbacher.

Senator BARACK OBAMA (Democrat, Illinois, 2008 Democratic Presidential Nominee): Good to see you, Joe.

Mr. WURZELBACHER: I'm getting ready to buy a company...

Senator OBAMA: Yeah.

Mr. WURZELBACHER: That makes $250 - $280,000 a year.

Senator OBAMA: All right.

Mr. WURZELBACHER: Your new tax plan is going to tax me more, doesn't it?

Senator OBAMA: Well, here's what's going to happen.

YDSTIE: Senator Obama goes on to explain that, if Joe buys the business and makes more than $250,000 a year, he would likely be taxed more under Obama's plan than under McCain's. For instance, if Joe were to make $270,000, his tax bill on that extra money would be $600 higher under Obama's plan than under McCain's.

But there are a number of things to consider here, says Bill Gale, co-director of the Tax Policy Institute. First, when Joe tells Obama that the firm makes about $270,000 a year, it's not clear if that's the amount the firm earns before or after expenses. That's important, says Bill Gale.

Mr. BILL GALE (Co-Director, Tax Policy Institute): Anything like rent or payments to workers or health insurance or supplies or investments, most small businesses can deduct all of that.

YDSTIE: So if the $270,000 the business earned was before expenses, it's likely Wurzelbacher's taxable income would quickly drop below $250,000. In that case, he'd do better under Obama's plan than with McCain's. In fact, Bill Gale says 98 percent of U.S. small businesses have taxable incomes under $250,000 and would get greater relief under Obama. Given his current salary, Joe Wurzelbacher shouldn't lose much sleep worrying about paying more taxes under Obama. He told Diane Sawyer on ABC's Good Morning America his income doesn't yet meet his aspirations.

Ms. DIANE SAWYER (Anchor, ABC's Good Morning America): To get straight here, you're not taking home $250,000 now. Am I right?

Mr. WURZELBACHER: No, no. Not even close.

YDSTIE: And Wurzelbacher admitted to The Associated Press he doesn't have a good plan to buy the plumbing business. He does work for Newell Plumbing and Heating in Toledo, which has a work force that consists of owner Al Newell and him. Bill Gale says that, actually, Wurzelbacher is exactly the kind of worker that Barack Obama is trying to target with his tax plan.

Mr. GALE: It's kind of ironic that he went after Senator Obama, and it's even more ironic that Senator McCain used him as an example because he's a perfect example of a taxpayer that will get a tax cut under Senator Obama and won't get a tax cut under Senator McCain.

YDSTIE: But Wurzelbacher seems more concerned with money he might make in the future than his tax bill now. He told Diane Sawyer, people who earn more should be able to keep what they make.

Mr. WURZELBACHER: Why should they be penalized for being successful? I mean, that's what it sounds like you're saying. That's wrong. I mean, because you're successful, you have to pay more than everybody else?

YDSTIE: It's clear the man now known worldwide as Joe the Plumber doesn't like paying taxes at all. In fact, Bloomberg news reports today that he owes the state of Ohio $1,200 in back taxes. John Ydstie, NPR News, Washington. Transcript provided by NPR, Copyright NPR.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.

John Ydstie has covered the economy, Wall Street, and the Federal Reserve at NPR for nearly three decades. Over the years, NPR has also employed Ydstie's reporting skills to cover major stories like the aftermath of Sept. 11, Hurricane Katrina, the Jack Abramoff lobbying scandal, and the implementation of the Affordable Care Act. He was a lead reporter in NPR's coverage of the global financial crisis and the Great Recession, as well as the network's coverage of President Trump's economic policies. Ydstie has also been a guest host on the NPR news programs Morning Edition, All Things Considered, and Weekend Edition. Ydstie stepped back from full-time reporting in late 2018, but plans to continue to contribute to NPR through part-time assignments and work on special projects.