Tax Advice for Joe the Plumber

I work with small business owners. Small businesses like the one Joe the Plumber wants to buy can be structured as LLCs, sole proprietorships or "C" or "S" corporations. In each case, the taxes will be different. I think Joe should get a good accountant who will explain to him how he can lower his tax liability. Anyway, when Joe says that the business "makes" $250,000 to $280,000, does he mean that's the annual taxable income?

In my area, plumbers charge $100 to $120 per hour, and they charge for travel time. Most folks around here feel that is way too much. What do people making the minimum wage do when they have to call the plumber for $120 per hour? They try to fix the leak themselves. I don't have a problem with a bit more progressive tax rates when they are hitting people who earn that much. I mean when nursery school teachers make $20,000 per year and public school teachers make $40,000 to $60,000 per year in before tax dollars, why shouldn't Joe's profitable business pay three percentage points more on what he earns over $250,000 to help lower teachers' taxes and enable them to have a bit more money to pay the plumber in an emergency or to pay for heat in winter?

Actually, I'd really rather have a flat tax and no social security taxes for the lowest wage earners. No FICA on anyone earning $25,000 or less. It would be an instant raise for the lowest wage earners and an instant tax break for all companies employing them -- including the self-employed small business owners. Then, make the top earners still pay FICA. That could bail out the social security system and boost productivity.

The funny thing is that Joe the Plumber reminds me of Josephine the Plumber -- the old spokesperson for Comet cleanser.

Paul Krugman Win Economics Nobel

Paul Krugman is a professor of Economics at Princeton and a columnist for the New York Times. I love reading Krugman's columns, but he got his Nobel Prize for his work on international trade. His work simplified much of the complexity inherent in explaining international trade. And it looked at international trade in a new way, explaining why Americans would buy Volkswagens, while Germans would buy Fords.

Here's a link to the lead story in the New York Times. http://www.nytimes.com/2008/10/14/business/economy/14econ.html?partner=permalink&exprod=permalink

Conservatives tend to dislike Mr. Krugman because he has many liberal ideas about how to make the economy work better for all. Even though I tend to be fiscally conservative, I think Krugman makes a lot of sense on many topics. But I did major in economics in college.

Starting a Nonprofit

I'm involved with two groups that are thinking of starting nonprofit companies. One would help seniors with transportation. The other would help them "age in place". Aging in place is a national movement to help seniors stay in their homes as long as possible. The Beacon Hill Village model, made famous by articles in AARP Magazine and The New York Times, is the model most groups are following. The group I'm with doesn't want to follow their model. We're creating our own.

The senior transportation nonprofit could follow a model from New Canaan, CT, called Get About, or the ITN America model.

In any case, even starting a nonprofit, we will need to do the same sort of work that any start-up must do -- ask the right questions about our mission, our goals, our strategies and our tactics. We'll need a plan. I'll contribute the questions I ask all start-ups -- read them on my website: www.upstartbusinessplanning.com.

I have another blog on aging in place, which I don't update often, but you can read some of my research, if you're interested -- www.agingwithgrace.blogspot.com.