History of ESOP Tax Law
Last week we provided an Update on ESOPs and Corporate Tax Reform. On April 20, 2012, the ESOP Association submitted a statement to the House Ways and Means Committee hearing on the Tax Reform and Tax-Favored Retirement Accounts that briefly reviewed the Findings of 2010 General Social Survey (GSS):
Today, I do not dwell on the reasons why Federal tax law encourages both retirement savings growth and more widespread ownership of productive assets through the ESOP model of ownership, as I know the ESOP community will have ample opportunity to present to the Committee members, and their staffs reasons that the ESOP model has created in the vast majority of instances more retirement savings for ESOP participants in companies that are more productive, more profitable, and more sustainable, while providing locally controlled U.S. jobs. We have the macro data to back up these statements, such as the recent General Social Survey 2010 that evidences that during the Great Recession of 2008/09, employees of employees stock owned companies were four times less likely to be laid off than employees of conventionally owned companies. The percentage to be specific were employees of employee stock owned companies were laid off during the Great Recession at rate of less than 3% whereas employees of conventionally owned companies were laid off at a rate of just over 12%.
The majority of the statement focused on providing a thorough review of the history of how ESOP laws developed.
The ESOP Association has also published a government relations primer for employee ownership advocates.