WASHINGTON, DC-Monday evening it appeared that a controversialand fiercely debated $848-billion tax cut package would pass in theSenate. All that remains, barring an eleventh hour surprise, is thepolitical posturing, not that that hasn’t been going in full forcesince the beginning.

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More than 70 Senators have voted to pass the legislation, morethan enough to move it to the next stage, which is to the House forconsideration. That is expected to happen by mid-week. It ispossible that House Democrats could derail the package, but thepolls showing broad support by much of the country will surelyfactor into their decision.

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Much of the package focuses on extending the tax breaks passedunder the Bush administration, for which Republicans have fiercelyadvocated, and Democrats have decried as adding to theever-mounting budget deficit. Most of the 11 votes against thepackage in the Senate were by Democrats.

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Other elements of the package extend unemployment insurancethrough 2011 along with a new 2% payroll tax reduction for allworkers. Energy and other tax breaks that were expiring this yearhave also been folded into the package.

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The tax characterization of carried interest--to date, atleast--has remained unchanged, Real Estate Roundtable CEO JeffDeBoer is pleased to report. “Job creation is what the economyneeds, and, as we have been saying for some time, the proposedcarried interest tax hike was a job killer,” he tells GlobeSt.com.“We are pleased it now appears to have been set aside.”

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President Obama, to the chagrin of much of his party issupporting the agreement, pointing to the benefits it is bringingto middle-class families. It will also, he has said, remove theuncertainty facing businesses and prompt them to beginhiring.

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Indeed, that has been a constant refrain by the businesscommunity as well as advocates of the tax cuts. If such a packagewere to pass, so the theory goes, businesses would feel morecomfortable taking on new employees.

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This thinking is simplistic at best and a fallacy at worst, saysHarold Levine, a tax partner at the New York City law firm Herrick,Feinstein. “First of all, tax certainty has not really happenedyet, in that the extension of the cuts appears to be onlytemporary,” he tells GlobeSt.com. “Secondly, not all kinds of taxcertainty drive the economy.” Tax certainty at higher rates, forexample, would probably be perceived as a negative economic factor,he said. So lower tax rates--rather than some vague notion of taxcertainty--will spur the markets and dealmaking by improvingafter-tax returns.

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“The reality is that businesses will act more prudently--but notnecessarily thrive--as a result of the extension of the tax cuts,”Levine says. “In the face of likely rising tax rates, manybusinesses were contemplating sales of assets or entire businessesbefore the end of 2010, to realize gain and pay reduced taxes. Now,with the extension of those tax rates, businesses are delayingthese sales. Many of these deals will occur at somepoint.”

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It’s good that the market is not reacting to non-businesspressures such as the tax landscape, he adds, so the extension ofthe tax cuts allows the market to work at its own pace.

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