ESOP Tax Cost Projected at $1.89 Billion

The Office of Management and Budget has calculated the costs of special ESOP tax benefits at $1.89 billion for 2007, rising to $2.67 billion by 2012. In comparison, the exclusion of reimbursed employee parking expenses will cost $2.89 billion, while 401(k) plans will cost $42.4 billion and IRAs $5.7 billion. OMB estimates calculate the non-taxability of the ESOP's share of corporate profits as a tax cost, although, arguably, it is actually only a deferral of tax that will be paid when employees receive distributions.