de agostini magazine

One very basic fact has been overlooked in the GOP adoration for Joe the Plumber, and that is the tax difference between gross receipts and taxable income.

Obama proposes to raise the tax rate on individual net incomes over $250,000. In order for Joe the Plumber to fall into that category, his Subchapter S business (when a taxpayer pays business income tax on their individual tax return instead of a business tax return) would have to have sales of at least $2.5 million, assuming a respectable (yet not always attainable)10 profit margin. Bottom line: itapos;s the bottom line that is taxed, not the top line.

Besides, if Joeapos;s business was large enough to generate $250,000 of taxable income, heapos;d be a fool to not have organized it as its own taxable entity, either� partnership or corporation.

What is more likely is that Joeapos;s business has $250,000 in sales. In that case, he might actually generate $25,000 in taxable income. Sorry, McCain-- Obamaapos;s tax plan would reduce Joeapos;s taxes.





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