Many Obstructions Await Joe the Plumber

But as a mascot for the we're-all-future-overtaxed-millionaires crowd, he leaves a lot to be desired. For one thing, Forrest Gump never owed $1,182.98 in back taxes, nor $1,261 on a defaulted hospital bill. Then too there is the problem that unlicensed plumber Samuel J. Wurzelbacher stands to pay lower taxes under a President Obama than under a President McCain under all but the most fanciful scenarios.

Bloomberg seems to have done the best job of exposing just how misplaced Wurzelbacher's fears are on behalf of the small business owners he longs to join one day. It points out almost 95% of America's 21.5 million sole proprietors report annual incomes below $100,000, according to the IRS, and that more than 95% of our four million subchapter S corporations earn less than $200,000.

Better still, Bloomberg has looked up that the company Wurzelbacher works for and hopes to buy has $510,000 in annual sales. Notwithstanding the fact that one of the largest plumbing companies in a neighboring state has just circled the drain, even a healthy profit margin would almost certainly leave the owner of a $510,000-a-year plumbing business well short of the $250,000 threshold targeted by Obama. Anything above that would be taxed 3.6 percentage points more under Obama's plan. How taxing would this be? If Plumber Joe ever made the taxable $280,000 he's aiming for, his income tax would rise $900, and that's before we even consider the generous tax deductions for retirement contributions he could make.

But let's get real: Joe Wurzelbacher isn't going to one day make that $280,000 by buying the company he works for: that might be the American Dream, but that's all it is. It would appear plumbing businesses in in his neck of the woods are selling for roughly three times earnings. So to clear $280,000 right away he'd have to pay maybe $840,000. Now let's assume that Wurzelbacher has $240,000 saved up (don't we all?) and let's further assume he could borrow another $300,000 from a bank (no sweat, right?) So let's assume he needs to save up another $300,000. The Obama campaign generously grants Joe the average Ohio plumber's salary of $40,600, but since he's merely an unlicensed assistant it would probably be safer assume the maximum of about $35,000 allotted for that job description at Career Overview. And if Joe saves up a third of that, he'll have the $300,000 he needs in just 26 years. By then, Barack Obama will be collecting what's left of Social Security.

The shareholder society is holding on of course, even if those shares are worth a whole lot less. But the whole notion of capitalism as a romantic, egalitarian pursuit is all but dead, buried under the economic rubble of the past year. Small business populism only seems to crop up when big business, and in particular big privately owned business, faces the prospect of an unfriendly presidential administration. The people financing this message are the very ones who led everyone to the precipice.

It seems fitting here, somehow, to quote from a memorable recent client letter by a successful hedge fund manager getting out of the business:

The low hanging fruit, i.e. idiots whose parents paid for prep school, Yale, and then the Harvard MBA, was there for the taking. These people who were (often) truly not worthy of the education they received (or supposedly received) rose to the top of companies such as AIG, Bear Stearns and Lehman Brothers and all levels of our government. All of this behavior supporting the Aristocracy, only ended up making it easier for me to find people stupid enough to take the other side of my trades. God bless America.