With the failure of the Joint Select Committee on Deficit Reduction comes the lack of a deal on payroll taxes and extended unemployment insurance. Meanwhile, one need not spend much time on the Ways and Means Majority web site to know that their big focus is getting a repatriation holiday from corporate income taxes passed. I suspect that their donors want this to happen before special tax rates on dividends expire at the end of next year. Gridlock on tax reform, and Democratic calls to let these taxes expire likely add to the urgency that they feel.
This is important because studies show that the last repatriation holiday did little to expand jobs. Instead, most of these funds were used to either pay dividends or in automation improvements which led to future job cuts. There is no reason not to expect the same result this time.
Comprehensive tax reform would have equalized the corporate rate, dividend rates, capital gains rates and the high income rate at between 25% and 28%. That is still a likely outcome, but it won't happen by the end of December, or even the end of January. Any compromise that raises taxes at all will likely bring out the Tea Party challengers in force, so I don't expect any deal until after primary filing deadlines have passed for most congressional races.
Rich shareholder contributors don't want to pay a 25% rate - they want the current 15% and they likely want it now, not at the end of next year. I predict that the next big battle will be whether a repatriation holiday can be dynamically scored (it costs money if it is not), whether that scoring assumes more jobs (which won't happen) and whether the GOP will insist upon it in order to pass extensions of exended unemployment insurance and the payroll tax cut.
Past experience dictates that the GOP will expect Obama to cave. Many on the left expect that too. I have one thing to say (even though my UI runs out at the end of January). DON'T LET HIM! DEMAND that no deal like this be made unless dividend tax rates go up enough to pay for UI, payroll taxes and the repatriation holiday - if not to normal income levels. Ideally, the preferred rate on capital gains should go up as well. At the very minimum, dividend rates should go to 20% - as any increase in the dividend rate gives CEOs paid in stocks or rewarded for increasing profits less of an incentive to CUT WORKER JOBS in response to a lower rate.
The higher the dividend rate, the less incentive there is to save labor costs through outsourcing, union busting or automation. While the 100% rate (including local taxes) was likely too much, leading to rotting infrastructure. The current rate, however, is definitely a main factor in job loss and employment stagnation. It should not only be allowed to expire - that exploration should happen a year early.