“Everyone will find something in this compromise they don’t like”, never a truer statement.

The left will pick and choose at different tax cuts, and “breaks for the rich”.   The GOP may have complaints over not being able to make these changes permanent.   But my complaint is more on the overall package and the lack of clarity that it creates.

The first is the obvious temporary nature of the package.   Any company sitting on cash, waiting for clarity in the economy and tax picture to expand or hire, has been given a small glimmer of light.   But a two year plan is short-sighted and unlikely to create sustained growth.    Short term goals can now be pursued and  some projects scaled up and completed.  But long term planning extends outside the two year window and still has long term risk.   This pushes the tax fight to the next election cycle.    Which I believe is exactly what both political parties wanted.

I understand the need to compromise and that in this session it is impossible to get a permanent extension of these tax cuts.   But the side effect is that this compromise codifies the temporal nature of these cuts and leaves the overall economic picture a murky political football to be used by each party to manipulate the electorate and economy to their needs.   This is not an environment for long term business planning.   I believe that the GOP can solidify this win and get the American economy behind making these cuts permanent with a simple political maneuver.

Make the two year extension temporary but build in a permanent trigger.   If this tax package does as the GOP expects, the economy will begin to grow and unemployment will drop and as a result tax revenues will increase, not decrease.    The GOP should put this belief into writing and the law.   If the tax revenues in all three categories (personal, corporate and capital gains) increases during the extension period (2011-2012)l; compared to the averages of 2009 and 2010; these rates become permanent.   If, as the Democrats fear, these cuts hurt “cost us” tax revenue then a debate on the value of each should continue.

This trigger will signal businesses, large and small, that they once again are in charge of the economy and government is giving them the window they need to expand and turn this economy around.

The good and the bad

We seem to have unanimous agreement that increasing tax rates on middle and low income tax payers would be disastrous.   What is even better is that we also have unanimous agreement that the Bush tax cuts were a huge benefit to low and middle income tax payers.   The President even stated financial numbers confirming this.   Democrats and the media that reveled in calling these “tax cuts for the rich” all through 2001, 2003 and up until 2010, have backed off their rhetoric.    The GOP needs an “I told you so” moment, but I believe they are unwilling to do so and risk it being spun into sour grapes.  This learning moment is likely to pass unfulfilled as so many are with these GOP lawmakers.

I was glad to hear the the “death tax” was included in this package.   I was disheartened to hear the President’s disdain for families wanting to pass on their American dream as inheritance instead of as a government windfall.   This tax is immoral anti-American and of all of the taxes this should have been made permanent.

I was not thrilled to hear of the extension of unemployment benefits.   I believe we have simply turned unemployment into a replacement for the welfare state.   We are paying people not to work.    The longer they do not work the harder it will be get back into the workforce.  How long until we have the debate about the fact that it is not enough money to live on, and the payouts must be increased?   Unemployment is on track to become a working wage for those that are unwilling to work.  That is a path to disaster.    I understand that this and all social programs are a political third-rail and neither party is willing or able to discuss the social decay they themselves are creating.    In the end, a growing economy and growing revenues will lessen the impact of these and give us the ability to roll these extensions back to a reasonable safety net.

I think the biggest and most necessary tax cut extension was captial gains.    If this tax cut was going to expire, billions of dollars would have been removed from the market in the coming DAYS and the economy would have spiraled downward once again.   This alone will solidify the gains in the market this year and allow those investments to continue to work for companies and individuals.

Those are my thoughts and first reactions to the stated compromise.   I am interested in reading and learning from others as the debate continues.  Let’s see where is goes in the next few days.

Statements like ‘tax cuts for 95% of Americans” leaves out the little fact the close to 40% of Americans do not pay taxes so their “tax cut” is actually a check based on someone else’s tax payments. That didn’t uses to be called a tax cut. It used to be called welfare or socialism. But “tax cut” sounds so much better and 95% is such a high number. The Wall Street Journal went in to this as well yesterday. Un fortunately their numbers are worse then I thought, they say under Obama 44% of people will n0t pay taxes. Then others will get a refund check that pay very little taxes. We are approaching the 50% mark when all Liberals will have to do to retain full power in blame the rich Republicans for trying to tax you. 50% of the population will do almost whatever it takes to vote themselves money out of other peoples pockets. An economy built on those principles will not last. Can we make it even 2 or 4 years under this model? Will it ever be reversed? I fear the incline of the slippery slope just got higher and Obama is greasing the skids. In fact I see that the Wall Street Journal just hit on this point today. This is far more scary then any tax policy could ever be.

The other statements about “taxing the rich” or that “most small business make under $250,000″ . I had heard (maybe seen) that 2/3 of the tax returns in the top 5% are s1 corporations and small businesses. How can these two be reconciled. Let me add in this simple fact, “most small businesses fail”. So since most fail and only a few succeed, Barrack Obama is right. Most small businesses due make under 250,000. The problem is that those that succeed and make money and want to grow and hire people are the ones he wants to tax an additional 10%. Those that succeed created 80% of the jobs in the last five years. Guess what… The Wall Street Journal hit on this yesterday.

I am glad to know I have this much influence over their reporting. Or maybe it is that they too have a bit of common sense. I am sure I will have more lying through statistics soon.