Working Joes and pay-stub realities

by John Griswold
John McCain has been working "Joe the Plumber" overtime, calling on Joe to fix the broken pipes that are flooding his campaign.

Using Joe as a springboard, McCain is now labeling Obama's purposed tax cuts as "welfare" for the 40 percent of working-class Americans who "pay no federal income taxes at all." As a guy who doesn't need to read his pay stub, McCain might be excused this ignorance of take-home pay reality; as a presidential candidate, I don't think so.

The truth? If you are legally employed in this country you pay federal income taxes, at a rate of around 15 percent of your gross pay, before your "income taxes" are ever calculated. I say around 15 percent because this bite is kept shrouded in tax code doublespeak, and it's a little hard to nail down.

As a master carpenter, self-employed for decades and now part owner of a small construction business, I know a bit about nailing. The self-employed can tell McCain about that first 15 percent. They confront it on form SE of their federal return, right after gross receipts and just before deductions. But for the majority of workers who receive a paycheck, it's more cleverly disguised.

This first 15 percent is called the payroll tax, and as the Bard once asked, "What's in a name?" It's entered on form 1040, just below the "income tax" box. You add the two figures, make a check out for the total, and send it to the IRS.

Now I'm probably missing some subtle distinction here, but when I write a check on my income to the IRS, I call it income tax. If you are a payroll employee you have already paid this tax in payroll deductions. The IRS suggests that your employer "contributed" half of the total. Don't believe it.

Let me put on my small-businessman hat. We don't contribute a dime to pay our employees' payroll taxes, at least we try not to. We have no lottery winnings or stock dividends to dip into when we pay our quarterly taxes.

Like every other viable business, we charge the full cost of employment for our crews, including the taxes they incur. And our guys earn every dime of this cost. If they didn't, we wouldn't last a quarter.

The chunk that FICA saws off of their checks doesn't end their liabilities. For example, we must pay 11 percent of payroll for workers' compensation insurance, a figure that never shows up on a carpenter's pay stub.

Some nit-picking accounting type will probably point out that this fee isn't an income tax either (though it is mandatory in every state). But when Joe rips open his pay envelope he is interested in the bottom line, not the semantics. As with payroll taxes, we have no magic pot of money to pay this mandate. Either our employees earn it or they are out of a job.

The truth is that our "Joes" are taxed out of more than 25 percent of their income before they even look at their "income taxes." As Warren Buffet has pointed out, they pay a higher tax rate than he pays as one of the world's richest men.

And we working stiffs can probably handle the taxes that keep our parents in their own homes and give them medical care that the marketplace would never offer, and that might cushion our retirements when our hands and backs finally give out.

But I'll be damned if we want some soft-handed suit calling us welfare queens. I'm speaking here of the consultant types who probably wrote these lines for McCain. I doubt that he would repeat them if he had ever paid a quarterly tax or filled out a form SE.

And if Uncle Sam kicks back to our guys a portion of the quarterly checks that we cut, I'm here to tell him, those checks were paid for with blood, sweat, creativity and the occasional tear.
* JOHN "GRIZ THE CARPENTER" GRISWOLD works in Salt Lake City.