Joe the Plumber's Taxes

The candidates spent nine minutes tonight talking about Joe the Plumber's taxes. Joe is buying his business, which makes $250,000 per year and is wondering why Obama wants to tax him more heavily.

Obama muffed the answer, as have most Democrats when faced with the argument that small businesses will suffer if we raise taxes on the wealthy.

The fact of the matter is, that if Joe the Plumber hires someone, that employee pays the tax on those wages, not Joe. Joe will only pay at the higher rate for money that he himself earns and for the profits that are made on equipment markup and the wages of others. If he personally pockets a quarter million dollars after hiring others, he can afford the higher rate. If he wants his taxes to go lower, he can hire someone and his tax rate will go down.

The dirty little secret of higher taxes is that they cause business owners to expand BECAUSE wages paid are deductible. In that way, higher taxes actually lead to more jobs, since the only way a business owner can keep his wages constant when taxes go up is to do more business, often by hiring more workers. It certainly won't cause job loss.