I was writing about Joe the Plumber and the Obama tax plan effect on his hopes to own a one-man or two-man business.

By the way, what was the gross for that 8-man business?

If there is a one-man or two-man plumbing business whose owner ( and worker) are each clearing a quarter million dollars in net profits per year (or taxable income for the employee), then I have to wonder how much that plumber is charging his customers per hour. That plumber also must not have many business expenses (business expenses are not taxed as income.)

$250,000 / 2080 hours = $120/hr
note: the nominal work week is 40 hours x 52 weeks per year = 2080 hours) So, this is 40 billable hours of work per week (i.e. no travel time to the job sites) with no vacations, no expenses, no sick days, no vehicle costs, no gasoline, no tools, no holidays at all (ie. can’t take a break for Christmas day unless it falls on Saturday or Sunday), no plumbing supplies, no phone bill, no advertising costs, no insurance premiums, no state taxes, no sales taxes, no office supplies, no utilities expenses, no FICA expenses, no half-days off to meet with the children’s teachers, no business expenses on any sort etc.

In the real world, a plumber netting $250,000 per year, probably has to bill, at a minimum, somewhere between $250 – $300 per hour, and probably more likely $400 per hour. (I know that I won’t hire a plumber at that rate.)

Then, only the income /profit above that level will be taxed at the higher marginal rate.

I hope this clarifies the impact that the Obama tax plan will have on Joe the plumber in Toledo, OH

(note: many small businesses don’t turn any profit for the first couple/few years of existence and only after time begin to show small profits. The tax code is set up to allow this in order to give small businesses a chance to grow and improve their bottom line as they become established.)