ESOPs Promote Economic Growth

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Alex Brill, author of a recent study that found that Jobs Grew by 60 Percent in S-ESOP Companies, has penned an op ed on Corporate Tax Reform.  In Tough Politics Are the Barriers To True Tax Simplification, the former advisor to the Simpson-Bowles bipartisan deficit reduction commission discusses the politics of corporate tax reform, reviews the economic proposals of both Presidential candidates, and notes the consensus of broadening the tax base by removing “tax loopholes”.  He stresses the importance of evaluating each tax preference to minimize any unintended economic consequences, citing S ESOPs as an example of a tax policy that is both a tax preference and a vehicle for economic growth:

The second, more complex challenge lies in assessing which preferences should be kept in the interest of national economic health. Consider just three policies that are technically tax expenditures but serve the objective of promoting economic growth...  Third, a policy aimed at facilitating employee ownership: S corporation employee stock ownership plans (S ESOPs) are also a deviation from a pure income tax system, but the benefits of promoting employee ownership are broad based and well established. S ESOPs drive stronger worker commitment, higher wages, job stability, and higher retirement plan contributions. Research that I recently conducted using Department of Labor data concludes that employment within a set of S ESOPs operating continuously over the last decade rose 20 percent, while the overall labor market has been roughly flat.