Joe the Plumber’s Tax Bill under Obama (Head of Household Edition)

October 16, 2008

Well, it turns out that Joe the Plumber has a kid and is not married. And that matters in the tax code as does just about everything else about you. So we have re-run the numbers for what Obama and McCain would do to Joe the Plumber's tax bill in 2009 changing the filing status and everything that comes with it. We assume Joe has the right to file head of household status, which assumes that he is the primary provider for his son.

UPDATE: We have now run the numbers starting with $280,000 in self-employment income as opposed to $280,000 in adjusted gross income. The difference is that starting with $280,000 allows us to give him credit for the 1/2 self-employment tax adjustment (above-the-line deduction).

So here are the new figures, and the difference from the married assumption is rather significant due to the different thresholds of when rates kick in and phase-outs begin. All the other assumptions are essentially the same as we used under the assumption that he was married with no children.

Under this estimate, we obtain a larger figure for Obama's tax increase on Joe due largely to the fact that we assumed that Obama would apply the PEP/Pease phase-out levels for heads of household at $200,000 (like singles). The remainder of the increase stems from the fact that the head of household marginal rates kick in at lower taxable income levels than married couples and therefore in the fifth bracket (which McCain leaves at 33% and Obama moves to 36%), this difference in rates is more important because more income is taxed there for a head of household earning $280,000 versus a married couple earning $280,000. Note that Tax Policy Center assumed in its modeling of the two plans that the phase-out thresholds of PEP/Pease were set at the same levels of singles. Joe makes too much to claim the child tax credit. Column 3 is a run under the assumption that Obama treats heads of household as married when it comes to the phase-out of itemized deductions and personal exemptions.

Tax Item

Obama

Obama (H.H. PEP/Pease = MFJ)

McCain/Current Law

Self-Employment Income

$280,000

$280,000

$280,000

Half S.E. Tax $10,682 $10,682 $10,682
Adjusted Gross Income $269,318 $269,318 $269,318

Personal Exemptions less phase-out

$3,212

$6,132

$6,083

Itemized Deductions less phase-out

$47,920

$49,420

$48,975

Taxable Income

$218,186

$213,766

$214,260

Final Tax Bill (2009)

$54,660

$53,069

$52,525


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