From NBC's Mark Murray
McCain makes the first aggressive move of the evening, bringing up a conversation Obama had with an Ohio plumber. McCain and the right have seized onto this part of the conversation: "I think when you spread the wealth around, it's good for everybody."
But here's the entire context of the exchange, per NBC/NJ's Athena Jones:
From two days ago, Obama canvassing in Holland, Ohio:
Then a big, bald man with a goatee asks if he believes in the American dream. He tells Obama he's getting ready to buy a company that makes more than $250,000 a year. "Your new tax plan is going to tax me more, isn't it?"
Obama tells him he'd get a 50% tax credit – a cut in taxes for health care. "if your revenue is above 250 – then from 250 down, your taxes are going to stay the same. It is true that from 250 up – from 250 – 300 or so, so for that additional amount, you'd go fro 36 to 39%, which is what it was under Bill Clinton. And the reason why we're doing that is because 95% of small businesses make less than 250. So what I want to do is give them a tax cut. I want to give all these folks who are bus drivers, teachers, auto workers who make less, I want to give them a tax cut. And so what we're doing is, we are saying that folks who make more than 250 that that marginal amount above 250 – they're gonna be taxed at a 39 instead of a 36% rate."
The man says he's a hard working plumber for 15 years – why should he be taxed more?
Obama says, "over the last 15 years, when you weren't making 250, you would have been given a tax cut from me, so you'd actually have more money, which means you would have saved more, which means you would have gotten to the point where you could build your small business quicker than under the current tax code. So there are two ways of looking at it – I mean one way of looking at it is, now that you've become more successful through hard work – you don't want to be taxed as much."
The man says, "Exactly."
Obama contined, "But another way of looking at it is, 95% of folks who are making less than 250, they may be working hard too, but they're being taxed at a higher rate than they would be under mine. So what I'm doing is, put yourself back 10 years ago when you were only making whatever. 60 or 70. Under my tax plan you would be keeping more of your paycheck, you'd be paying lower taxes, which means you would have saved down to the point where you (inaudible). Now look, nobody likes high taxes. Of course not. But what's happened is is that we end up – we've cut taxes a lot for folks like me who make a lot more than 250. We haven't given a break to folks who make less, and as a consequence, the average wage and income for ordinary folks, the vast majority of Americans, has actually gone down over the last 8 years. So all I want to do is – I've got a tax cut. The only thing that changes is I'm gonna cut taxes a little bit more for the folks who are most in need and for the 5% of the folks who are doing very well - even though they've been working hard and I appreciate that – I just want to make sure they're paying a little bit more in order to pay for those other tax cuts. Now, I respect the disagreement. I just want you to be clear – it's not that I want to punish your success – I just want to make sure that everybody who is behind you – that they've got a chance at success too."
The man says it seems like Obama would be for a flat tax.
Obama says, "you know, I would be open to it except here's the problem with a flat tax is that if you actually put a flat tax together, in order for it to work and replace all the rvenue that we've got, you'd probably end up having to make it like about a 40% sales tax. I mean that's the value added, making it up. Now some people say 23 or 25, but in truth when you add up all the revenue that would need to be raised, you'd have to slap on a whole bunch of sales taxes on. And I do believe for folks like me who have worked hard, but frankly also been lucky, I don't mind paying just a little bit more than the waitress that I just met over there who's things are slow and she can barely make the rent. Because my attitude is that if the economy's good for folks from the bottom up, it's gonna be good for everybody. If you've got a plumbing business, you're gonna be better off if you're gonna be better off if you've got a whole bunch of customers who can afford to hire you, and right now everybody's so pinched that business is bad for everybody **** and I think when you spread the wealth around, it's good for everybody. **** But listen, I respect what you do and I respect your question, and even if I don't get your vote, I'm still gonna be working hard on your behalf because small businesses are what creates jobs in this country and I want to encourage it."
The crowd cheered and Obama added, "for small business people, I'm gonna eliminate the capital gains tax, so what it means is if your business succeeds and let's say you take it from a $250,000 business to a $500,000 business, that capital gains that you get – we're not gonna tax you on it because I want you to grow (inaudible). So you're actually gonna get some, you may end up – I'd have to look your particular business, but you might end up paying lower taxes under my plan and my approach than under JSM's (inaud). I couldn't guarantee that, 'cause I'd have to take a look at ---
The man says, "Oh yeah, I understand that."
As Obama walks away he says, "I gotta get out of here. I've gotta go prepare for this debate, but that was pretty good practice right there!"