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Top earners react to tax plans

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Solo practitioner Dr. Jennifer Gobel
Solo practitioner Dr. Jennifer Gobel wants to hire a doctor to join her pediatric practice in West St. Paul. She has this office all ready for them. But if Obama is elected and succeeds in raising taxes on families making more than $250,000-a-year, Gobel might delay making that hire.
MPR Photo/Curtis Gilbert

Dr. Jennifer Gobel didn't hit the quarter-million-dollar mark last year. But she's been there before, and she hopes to be there again, soon.

"I'm a very unusual specimen these days," Gobel said. "I'm a solo practitioner."

She used to make good money practicing in a hospital. But four years ago, she decided to start her own pediatric clinic in West St. Paul.  She's been steadily building her practice, and she's got big dreams for this place.

"I'd like to have two or three partners," she said. "I'd like to expand in this office space."

She'd like to hire another physician soon. In fact she's got an empty room, all decked out.

"I've got a nice big desk, a credenza, a bookcase -- plenty of room for a new doctor, but just waiting to make that happen," she said.

And Gobel says, if her tax burden increases, that might make her think twice about expanding her practice -- or at least slow her down.

And that brings us to the argument that underlies John McCain's tax policy.

"So let's not raise anybody's taxes, my friends," McCain said in last week's presidential debate.

McCain says Barack Obama's tax plan will hurt small businesses, and thus, job creation.

"His tax increases will increase taxes on 50 percent of small business revenue," McCain added.

If you just skimmed that quotation, you might have thought he said "50 percent of small businesses," but he didn't. He said "50 percent of small business revenue."

And McCain is right when he says that, but Obama was also right in the deabte when he said, "only a few percent of small businesses make more than $250,000 a year."

"Most small businesses are well below the level of incomes that Obama would increase taxes," said Roberton Williams, an economist, who's done an in-depth study of both McCain and Obama's tax proposals.

John Morrison
For the first time in their lives, John Morrison and his wife will see their income exceed $250,000 this year. But even though Barack Obama wants to raise Morrison's taxes, he's still going to vote for him.
MPR Photo/Curtis Gilbert

"That said," Williams added, "the most successful are people who do make money and they would be above those levels."

So, really what we're talking about here is whether we should increase taxes on the most profitable small businesses.

But Williams says the research shows raising taxes on small businesses doesn't have much effect on whether they add jobs.

"There's some change in how people characterize their income, but there's relatively little change in terms of behavior," he explained.

And so, we end up with an argument that's not so much about how the tax code affects small businesses, and is more of a moral question: Should we tax success?

Dr. Jennifer Gobel says, "No!"

"Society says, 'Oh we want people to get good quality health care. We want people to know their patients well and take good care of them,'" Gobel said. "And yet you do that, you make above a certain amount of money and all of a sudden, society says 'oh, by the way, we'd like half that money that you make to go to taxes.'"

But there's also a compelling moral argument to be made on the other side.

John Morrison and his wife are going to find themselves above the quarter-million-dollar mark for the first time this year. 

"Oh God. I don't know how to describe it," Morrison said. "I feel good. It's good to have money and not have bills and debts and a bunch of other things."

He works for a financial firm. She's a professional, too. And they are part-owners of family business, which generates good profits. 

But even though Barack Obama is promising to raise his tax bill, John Morrison still plans to vote for him.

"It's not going to take food off my table," he said. "It probably means that I'll just spend a little less on a new big screen TV or something like that."

He'd rather see tax cuts go to people lower down the income scale.

"If that's a fraction of a percent of my income as opposed to someone in a lower tax bracket where they're getting a significant boost to help them try and drag themselves out of whatever problems they might be in, I think that's a good thing," Morrison said. "I don't think it's socialism to help other people."

One reason Morrison feels that way, is he remembers what it was like to make a lot less. And it's always possible he could find himself back there someday.

"If one of us loses a job in this economy -- I work for a financial institution. Although they're amazingly solvent and doing amazingly well, you never know what's going to happen," he said. "So, there but by the grace of God go I."

Both John McCain and Barack Obama are promising additional tax cuts to lower and middle-income Americans. 

According to the analysis Roberton Williams did for the non-partisan Tax Policy Center, if you make less than $100,000 dollars-a-year, Obama is promising to cut your taxes by significantly more than McCain is.

But people above the quarter-million-dollar mark will pay more under Obama. That is, if the economic crisis doesn't force whoever becomes president to change his plans once he takes office.