In Joe the Plumber Video, Obama Actually Overstates Joe’s Tax Hike

October 17, 2008

There has been a lot said about Joe the Plumber over the past few days since the video of him on the campaign trail with Joe (whose first name is actually Sam) first appeared and then John McCain turned him into campaign material.

But in the video, Obama appears not to understand the specifics of his own tax plan. First, he makes the typical mistake of equating revenue with income. Many in the leftist blogosphere have criticized Joe for possibly mixing the two up (because you are taxed on net income), but Obama makes the same mistake in the video. Obama then makes another mistake regarding the rates of his own tax plan and where they kick in. Here's his quote that describes how his tax plan would affect people like Joe (assuming Joe is telling the truth in his situation):

If your revenue is above $250,000, then from $250,000 down, your tax is going to stay the same. It is true that for say $250,000 up, from $250,000 to $300,000 or so…so for that additional amount, you'd go from 36 to 39 percent.

Actually, the rate we are talking at these levels is 33 percent going to 36 percent…not from 36 percent to 39 percent. And it's not 36 percent, it's 35 percent.

What's funny about this is that under both mistakes Obama is actually overstating to Joe how much his tax bill would be under Obama's tax plan. The video shows that Obama seems to understand the basic structure of the tax code (the marginal rate system) fairly well, but he just doesn't know the specific details of how his own specifics would fit into that system.

Later in the video, Joe makes a pitch for the flat tax, while Obama misinterprets that as the FairTax (the national retail sales tax) and starts going into a critique of the FairTax. The two reform proposals may have similar goals, but they take totally different paths in attempting to reach there.

Regarding this whole question of "spreading the wealth," we need to take a step back. Joe doesn't believe in spreading the wealth (he has said so in other interviews), but even a pure flat tax spreads the wealth if the distribution of the benefits of government spending do not line up with the distribution of income (or consumption). Sen. Obama, on the other hand, argues that spreading the wealth benefits everyone. Imbedded in this justification then for government to spread the wealth is an assumption that people would not spread the wealth on their own in the absence of the government. In other words, he must assume a free-rider problem. (I would agree with that.) But throughout this entire debate of redistribution, spreading the wealth, etc., nobody is getting to the core question: what is the public good in redistribution or "spreading the wealth," and how much is the optimal amount?


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