Joe the Plumber and the Middle-Class Income Range

According to a New York Times story, Wurzelbacher asked Obama if he believed in the American dream, and voiced concern about Obama’s tax plan, and having to pay higher taxes as a small-business owner. “I’m getting ready to buy a company that makes $250,000 to $280,000 a year,” he told Obama. “Your new tax plan is going to tax me more, isn’t it?” Obama gave a lengthy response, toward the end saying, “I think that when you spread the wealth around, it’s good for everybody.”

In the time since, the episode has made the rounds on the Internet, TV, in print and perhaps most notably, during the final presidential debate at Hofstra University. Sen. John McCain raised the issue of Joe the Plumber, and both he and Obama went on to explain why their tax plans would be more beneficial for America. According to a New York Times breakdown of the candidates’ tax plans, Obama’s tax plan would repeal the Bush tax cuts for households earning more than $250,000, extend middle-class cuts, like the $1,000 child tax credit and the marriage penalty relief, and triple the earned income tax credit for workers earning minimum wage. McCain would make permanent nearly all of Bush’s tax cuts, increase $3,500 personal exemption for dependents by $500 a year, until it reaches $7,000 in 2016, and offer the option to pay taxes under a simplified code with only two tax rates.

So how do these tax plans effect what the middle class pays in taxes, and what does it mean for those in the middle-class income range, like Wurzelbacher? Tax analysts in a NYT article said neither Wurzelbacher’s personal taxes nor those of his business would be likely to rise under Obama’s tax plan. However, a NYT graphic in the same story illustrates that the tax bill of a plumber in a situation similar to Wurzelbacher’s would be slightly less under McCain’s plan–$20,468–compared to $21,068 under Obama’s tax plan, assuming no retirement contributions.

If you define the middle class income range as those workers making less than $250,000 annually, the following are jobs that some may be surprised to find fall into the middle class bucket, on average.

*at a company with approximately 500 employees

So, who are the people who make up the upper class — those earning $250,000 or more annually? Here is just a sampling:

* at a company with approximately 500 employees
++ at 50 or more partners in firm

The Middle-Class Squeeze

Joe the Plumber seems like the average middle-class income American–working to provide for his family and pay the bills, concerned about his future finances and whether they’ll improve.

His concerns about the American dream and his finances are reflecting the middle-class income range squeeze, which is about more than taxes. People are feeling squeezed because the traditional cornerstones of middle-class life are crumbling, says a report by American Human Development: wages in the middle have stagnated or fallen, while those at the top are soaring; job security has disappeared, the real-estate market has tanked, and public education is expensive. It’s not excessive consumption by the middle class income range that’s causing the problems, but the increasing costs of necessities (housing, food, energy, health care) coupled with stagnant wages, the report explains.

For example, median household income, which is $48,200, is down about $1,175 since 2000, while mortgage payments are up $1,730, gas bills are up $2,195, and utilities and food are up $330. To get by, more Americans–particularly women–are working, they’re working longer hours, and they’re accruing massive debt to finance their increasingly expensive existences. Millions are also doing without healthcare, skipping doctor visits and tapping into their retirement plans.

Easing the squeeze won’t come easily. The more public debate we have about the issues causing middle-class income range angst, the better–whether it’s in the context of Joe the Plumber, or not.