Congressional Budget Office Lists ESOP Tax Benefits as Potential Cost Savings

The Congressional Budget Office (CBO), in its annual report on budget options, lists eliminating special ESOP tax benefits as a way to save tax dollars. It specifically references the deductibility of dividends and the ability of certain sellers to an ESOP to defer taxes on their gain, although it states that all special benefits could be removed so that ESOPs have the same tax treatment as other benefit plans. The CBO says this would save $600 million in 2010, gradually growing to $1.3 billion by 2014. The report says that studies on ESOPs and corporate performance are mixed and that encouraging ESOPs can reduce retirement plan diversification.

The option is one of 188 listed. The options are drawn from prior legislative proposals from members of Congress, the executive branch, CBO staff, and private entities. The options are meant to be illustrative only. On its related blog, the CBO states that "they are intended to reflect a range of possibilities, not a ranking of priorities, and the selection or omission of a potential policy change does not represent an endorsement or rejection by CBO." The CBO has listed these changes in prior reports.

For details, go to the Congressional Budget Office, Budget Options, Second Volume, option 22, at this link.