Here's the original exchange that gave birth to the "Joe the Plumber" phenomenon in yesterday's debate:
We give Obama props for persistence in trying to make his case to Joe. But not for speaking accurately or clearly. He's stylishly blowing thick smoke.
First, his "tax cut for 95% of Americans" will be considerably less than the tax cut that they have already received under Bush. There's no actual legislation on this, of course, but it's estimated at hundreds of dollars a year for middle-income earners, not thousands. Much would depend on particular behaviors, like enrolling in college or buying a fuel-efficient car. To say that Joe would have got richer quicker under Obama is to grossly overestimate the effect of such a small reduction. How many years of a $500 tax cut does it take to buy a plumbing business, and would you even want to if you know that Uncle Sugar would take 40% of your profits?
Second, Joe had him when he said that Obama should favor a flat tax. Obama responded not to a flat tax, which means applying the same tax rate to all income, but to what Huckabee and others called the "fair tax," which is a consumption tax (i.e. a federal sales tax) rather than a tax on income.
In fact, Obama's plan is to move farther away from a flat tax toward an tax system that relies even more on revenue from the very highest earners. As it stands, about 40% of tax returns are filed by people who owe no federal income tax at all (the Bush tax cuts put SWNID in that blessed category for a short season of bliss, but alas, they also propelled the household into a level of prosperity at which we resumed federal income tax payments). The next 20% pay only 4% of federal income taxes. That leaves 96% of federal income taxes paid by 40% of Americans, and 40% of taxes paid by the top 1% of taxpayers.
It's pretty tough to imagine a scenario in which the well-off should pay more than that, let alone calling such an arrangement fair. It's also easy to see how such tax rates would discourage the investment that drives a modern economy. But when nearly half the country pays nothing, it's also easy to see why people don't see government spending as something that concerns them. It's not their money that's being wasted.
Of course, Obama makes all this work by offering a "tax cut" to people who don't pay taxes, that is, by giving them a tax credit that produces a refund even if they don't pay taxes. So his higher marginal rate on the rich is nothing more than redistribution of income from the rich to others. We've got a lot of that now, in the form of various public assistance programs and the Earned Income Credit. Do we need to make such handouts an entitlement for a considerable number of America's middle class?
Further, Obama is disingenuous in saying that most American small businesses earn less than $250k/year. He's never said whether that figure represents gross or net, for example, at least that we've heard. But beyond that, he's never indicated how he counts small businesses. Perhaps businesses aren't "small" above $260k per year, so he's only counting those in between. Perhaps he counts every S Corporation and Schedule C filer, most of which are sole proprietorships that don't create jobs, as a "small business." If so, then the SWNID household has two small businesses. Very small, with no employees and little income, yet paying taxes. At any rate, his numbers are opaque. Deeply so.
But back to Joe and Barack. The whole episode demonstrates that Obama's gift is not in formulating policy or even explaining it but in filibustering his way through tough spots. He's not explaining his point or even acknowledging others' points. He's bluffing, effectively.
It's effective because this is what people want to hear. They've been messed over by the rich, who take too much that ought to belong to the Sainted Middle Class. Time to get the torches and pitchforks, storm the castle, tar and feather the nobles and take their loot.