When the vast majority of folks are unemployed, impoverished, unwell, and unhappy, revolutions of some kind happen.
What frightens me is that the anti-tax crowd resembles the likes of Papa Doc, Charles Taylor, and other total dictator types in many 3rd world countries.
BTW the educational system is so bad now that I doubt the average American knows anything about French history.

Except, perhaps, compared to the prospect of net paychecks shrinking after Jan 1. It would be easynto design a better economic strategy. Getting such a thing enacted is another matter entirely.

Mr. Maule's blog should be required reading for all members of congress. But given the average IQ of said members appears to be little above the average ambient air temperature in DC in the winter, I wonder if most of them could read and understand his excellent commentary.

"The rich will get richer, and the poor will get poorer, as the trend lines in effect for the past ten years get extended for another two years."

Has that really changed whether we have higher or lower taxes? IF the whole thing about higher taxes is to fix the deficit, I have very little faith that any upside in income would be used to reduce any spending, rather spending would just grow that much faster.

"the anti-tax crowd resembles the likes"

They also resemble the likes of the hard-line progressives.

This screed reads like it was written by someone who has never worked hard scrabble to establish, run or grow his own business. Like all too many academics this Philadelphia Main Line posuer is an unenlightened tool.

Business growth/expansion isn't about algebra; it's about strategy, risk and reward.

If an entrepreneur has to look over his/her shoulder at a government poised to pick on him/her for being successful, targeting/isolating the entrepreneur from the rest of the population and taxing away seed corn profits (profits that for many years need to be largely plowed back into the business if it is to thrive and provide job growth), then multiplying that disincentive by the specter of regulation which dictates how to run the business, and setting numerous standards for how to compensate and manage employees, and then if one nevertheless proceeds with the business and should happen to die, the government sweeps in to rip apart the business (via the estate tax) instead of allowing the entrepreneur (who likely worked 80 hours a week) to provide for the security of his/her family, then why bother? The answer for many would-be successful enterprise operators is never to start down that road, or to quit a nascent enterprise and find a government job.

By the way, I know at least bit of what I am talking about. In my wife's immediate family and mine 7 of the 8 brothers and sisters operate independent businesses; the independent business is the primary employment for 6 of the 7.

As for rebellion, I saw on CNN yesterday that Democrat house members are insisting on an estate tax that starts at $1 million and imposes tax above that exclusion at 55 percent. Now that’s something to rebel against.

In the case of my family, we've scrimped and saved and invested wisely, having never come close to making the $250K income cutoff that's cited so often as demarcating the top of the middle class, and have all but paid off the mortgage on a home that has appreciated in value. By investing and saving instead of borrowing and leveraging, we have been prudent and responsible -- I would think a model. Yet, under this Democrat estate tax plan, if my wife and I were to die tomorrow, either our elementary school aged kids would lose their home, they would no longer have money for their college education or they would suffer from having assets confiscated that could have been used to raise them to adulthood. Take your pick; at least one of the three will be gone.

As far as I am concerned the Democrats can take their moral outrage and stick it back down their throats. The Dems had two to four years to address legitimate concerns like those that I raise and they spent most of that time coddling Charlie Rangel instead of moving forward on a tax bill.

And please don't tell me that my out is to turn over money to Warren Buffett or AIG (insurers both). Folks, the turning over of assets to financial dweebs is a huge part of what got us into trouble in the first place.

And thanks for giving that little extra boost that I need to get going on a Friday morning.

The New York Times reported that 25% of the package went to the top 1% of income. Also, a couple of points that did not make the news.

1. 6 million Federal and State employees are not in the SS sytem. They will get no benefit from the payroll tax decrease. The lower income earners in that group will lose the Making Work Count tax credit.

2. Republicans voted down a program to reimburse 9/11 rescue workers damaged in the attack. The amount was less than 1% of the Tax Compromise, but Repubicans said we cannot afford it.

The political damage of the "Compromise" is that Obama has lost the trust of the voters. The American people know that many campaign promises will not be kept. They may be unrealistic (I will balance the budget), too vague (I will restore American greatness), or need to rely on other actors (I will bring peace to the Middle East). However, the promise to not extend the Bush cuts for the wealthiest citizens was a center piece of the Obama campaign. Going forward no one will be able to believe any committments that Obama has made, and this more than anything else may doom his re-election chances.

One does not need to agree with the positions of Ronald Reagan, Margaret Thatcher or George W. Bush to admire their steadfastness in their positions.

Had Obama stated that

"I campaigned on not extending the tax cuts for high income earners, I was elected on not extending the tax cuts for high income individuals and I will veto any bill that continues those tax cuts and I will veto any bill that reduces the Estate Tax that does not contain permanent Middle Income tax cuts and if you don't like it, see me in the 2012 election"

two things would have happened. One, the Republicans would have caved faster than the Buffalo Bills in a Super Bowl, and two, his re-election would be a near sure thing.

Finally, the over-under on how long it will take the Republicans to blame Obama for increasing the deficit with the "Compromise" is 11 days.

Reading Mr. Foster's emotional post on the proposed Democratic Estate Tax Plan, which was a substantial reduction in 2011 Estate Taxes for smaller estates than current law I had to wonder if he had truly examined the facts.

Since he did not provide any data on his financial situation or a set of example data, let me state some scenarios, using the Marital Deduction since he is apparently married.

1. Estate of $1 million - no Estate Tax
2. Estate of $3 million - no Estate Tax
3. Estate of $7 million - no Estate Tax
4. Estate of $10 million - Estate tax of $1,350,000 or 13.5% leaving an Estate to his Children of $8,650,000. This amount, invested in a diversified portfolio of tax exempt 5% bonds would yield his children an after tax MONTHLY income of about $36,000 and preserve 100% of the principal. I wish Mr. Foster and his wife a long and happy life, but if they should die I think his children will be ok financially on $36,000 a month of disposable income.

I do not mean to pick on Mr. Foster, who is certainly sincere in his beliefs. There are valid arguments in opposition to the Estate Tax but unless those who are opposed to the proposal by the Democratic party can present their arguments on a fact based basis, they cannot expect their arguments to prevail. I have seen no studies, and know of none that exist that show small businesses being liquidated to pay the Estate Tax. Simply stating that something is a fact does not make it true.

"I have seen no studies, and know of none that exist that show small businesses being liquidated to pay the Estate Tax."

OK, Dad has net worth tied up in ill-liquid assets, say investment property or business with lots of capital investment done or needing to be done. Said assets generate cash flow and have great worth, but aren't really sellable in pieces. Dad dies and kids get the estate which is nice bump in their net worth, but the IRS thinks so also.

Of course, you could just delay paying any estate tax by setting up a trust, but I'll defer to Mr Bog, since I am out of my league on that one.

IIRC a similar conversation with respect to a privately held corporation within my extended family, the concern was that, if a stockholder (other family members) were to die, his/hers spouse could wind up actually owing money to the IRS, being unable to pay, as there is a difference between the perceived value and the real value of the holding. The only solution would be that other members buy out that portion, putting that spouse in a vulnerable position.

I guess that would be a problem in liquidity.

It was a number of years ago; I had an option to join and I remember weighing the pros and cons at that point. I decided against it but not for any reason surrounding these doubts raised.

Didn't see your post, Steve.

The professor dismisses the FICA tax cut as irrelevant; to me, that's the best part of the whole deal (if there is a deal). FICA is about the most regressive tax around, since it does not affect income over $108,000 or so. All the people who will benefit, by definition, are working stiffs who are not "rich".

No one should worry about how the saved money gets spent; if your take-home pay goes up, you're better off.

My biggest complaint about the new tax bill is that it added over $900 Billion (one of many estimates)to our deficit. Both Parties are not listening to what the commoners have been saying in the last election and before. It is a confidence factor that citizens are looking for from our governments that the deficit will be reduced. This would be the stimulus.

In the details. all the riders to the bill are absurd, and contrary to what Congress just flogged themselves for. Leave out most of the riders, and increase the top rate of 35% to 38% for those making over $1 Million. There's still enough exemptions, etc. in the tax code that some would still prevail in getting their annual income below $1 Million.

FICA is not a tax. The State of Oregon does not allow you to use it as a deduction, because it isn't a tax.

Or so they say. To me, it's a gray area, as I cannot withdraw from the program if I wish. It gets dicier if you reach retirement but continue to work. You both get SS and FICA withholding.

Sid - that was the best comment I've seen about this whole mess. I've been trying to understand the outrage and despair (aired by our beloved BoJack as snarkiness), and I think it centers on this: he broke a campaign promise, and he's lost a lot of trust with a lot of supporters.

So now we basically have two choices. We can either continue to support Obama, while still strongly disagreeing with his methods and content of compromise. Or, we can stew in our vague wrath about evil corporations and how big business is out to ruin people's lives, and snarkily trash Obama at every turn (e.g., searching for obscure tax professors to back our beliefs), and search for a contender to unseat him in 2012. I'm telling you, in order to govern, politicians have to "sell out" all the freaking time! You have to deal with the political and economic reality of the moment. Has he been perfect? Far, far from it. But he's the best hope we have right now against some crazy batshit people on the other side of the aisle, and for myself, I haven't lost trust in the guy's intellect, intentions or character. Obama is a pragmatist first, a progressive second. So I'm going to continue to support, WHILE criticizing, this President. Both are possible!!!

Sid, I have no concern what happens to my kids financially if my wife or I are alive. We have three kids who will start college after I turn 65. We have worked hard to get where we are so our kids would be taken care of through college, even if both of us were to die, which given our ages is a real statistical probability.

The Democrat endorsed estate tax plan, as it was described yesterday afternoon on CNN, screws over my family royally if Mom and Dad were to die, which is the scenario I presented in my post, and which you ignore in your response. You have no business reaching into my or anyone else's pocket for that purpose -- none.

Starbuck and Steve present a logical argument, but it is totally anecdotal. Show us the studies, the data, the empirical results that support your anecdotal analyis. Also, Starbuck ignores a Life Insurance Trust which is an easy and inexpensive way to take care of the problem he or she raised. Steve's point does not recognize the fact that spouse's do not pay Estate Tax on inherited property. With respect to Mr. Foster, I still do not understand how his family is financially devasted by an Estate Tax with a $7 million deduction, but if he will post data showing us how this is done I am certainly open to changing my mind. I fear, however, that he does not fully understand the Estate Tax and his arguing from false information and assumptions.

Kevin's position on the "Compromise" is, I think, correct, but the problem is that in the macro universe the loss of intensity for Obama may well doom his re-election. Look at the 2010 midterms. There was a huge gap between likely and registered voters, and had the election reflected registered voters the Democrats would have had substantially less losses and may have held the House. I just do not think Obama and his advisers have any concept of politics, intensity matters and character matters. Voters hate betrayal and will punish it, even if the betrayal is to a position they agree with.

A good example of this is the current situation in Britain. The Lib/Dem party campaigned heavily on reducing college tuition, then immediately supported a tripling of tuition once they joined a coalition government with the Conservatives. The measure passed yesterday, but caused violent protests. I think the intensity of the protests was a direct result of the Lib/Dem party going back on their campaign promises. Opinion polls show the Lib/Dem party plummeting in popularity, and most observers think it will be decades, if ever before the party becomes a national force. Obama has potentially put the Dems in a similar position. He has lost the admiration and respect of his followers, and not gained anything with his opponents.

The tax sellout is not a stimulus

No, it isn't. I don't think it was really sold as that. At least I never thought of it as a stimulus. It was more of a recognition that all hell would break loose (and may still, if your wing of the D's has its way) come January if tax rates went up. The ideological left and right together won't get you elected if you ignore the real middle class. If last month's elections were lost on some, I doubt Obama missed the point.

The phrase "dead right" comes to mind.

This stuff is just a pol doin' what pol's do. You thought it would be otherwise?

Why?

This economist sounds like a person t hat believes that government a.) creates jobs and b.) creates wealth.

It does neither. Government takes money and redistributes it as it sees fit.

Tax rate decreases reduce the amount of money the government can take. Individuals then have that capital to buy things, invest it into things, etc.

Yes, government can take money from the private sector and create a government job, but one can argue that that job is neither competitive (or the market need would have already created it) or create capital (the job took money it didn't create and can never create and spent it, frequently in ways that never redistribute that wealth back into a capital investment. Every $ spent on a government owned piece of capital is like a that same capital disappearing forever. *You* can't use it, *you* have very little or no rights to it, and frequently, the money spent is depreciated in value by the capital it is spent on because the market didn't justify the investment in the first place.

It's like shipping rocks to a quarry that already has rocks.

"Starbuck and Steve present a logical argument, but it is totally anecdotal."

BS - I think every example I give you, if it disagrees with your idee fixe, will be called anecdotal. Unless you want to tell me there are only 2 or 3 people with their wealth in real estate or businesses that don't throw off a lot of cash.

"spouse's do not pay Estate Tax on inherited property"

So what, most spouses die before their kids do.

I think your assumption that if someone doesn't pay an estate tax, then they'll never pay a tax which is way wrong. They will continue to pay taxes, we've just made death a taxable event - which doesn't make sense.