New University of Pennsylvania Study Finds S ESOPs Yield Billions in New Benefits...

New University of Pennsylvania Study Finds S ESOPs Yield Billions in New
Benefits for U.S. Workers and the Economy

WASHINGTON, July 28 /PRNewswire-USNewswire/ -- In a new University of
Pennsylvania study, two leading tax and economic experts found that Subchapter
S companies owned by their employees through ESOPs generate some 85,000 new
jobs each year and create $14 billion in new savings for workers that
otherwise would not have been earned. "From a long-term societal perspective,"
write the study's authors, "it is perhaps the best possible gain: a forced
retirement plan."
The authors reported that S ESOPs offer their workers higher job
stability, which accounts for $3 billion worth of the workers' savings.
Moreover, they found, S ESOPs' higher productivity, profitability, job
stability and job growth collectively help ESOP companies amass $33 billion
more in combined earnings than what they would earn if they were not
ESOP-owned S corporations.
The authors' economic analysis of the current-law tax benefits for S ESOP
companies led them to conclude that the creation of S ESOPs by Congress more
than a decade ago has increased tax collections from both employees and
employers. This, the authors report, is largely because the additional wealth
created by S ESOPs generates additional federal and state taxes; because S
ESOPs do not expand capacity among deferred-tax savings options (such as
401k's and others, which they note are under-utilized); and because workers
pay taxes on their S ESOP savings accounts when they are liquidated at rates
substantially higher than what are paid on other tax-deferred plans.
The study, which represents the first ever assessment of the costs and
benefits of S corporation ESOP laws, was released yesterday by the University
of Pennsylvania'sMichael Knoll and Steven Freeman. Freeman is a Senior
Lecturer and Resident Scholar in the School of Arts and Sciences and Resident
Scholar in the School's Center for Organizational Dynamics. Knoll is the
Theodore Warner Professor of Law and holds a secondary appointment at the
Wharton School.
S corporation ESOPs have become the subject of some scrutiny, noted Knoll
and Freeman, since the December 2007 announcement by Chicago financier Sam
Zell that he was acquiring the iconic Tribune Company and converting it to an
S-ESOP company. According to the authors, Congressional passage of laws
allowing for S ESOPs more than a decade ago has led to the creation of nearly
3,700 S ESOP companies nationwide (about 40 percent of all U.S. ESOPs), and
that about 3.7 million Americans work and participate in S ESOPs.
ESCA provided some of the funding to support the research for this study.
The Employee-Owned S Corporations of America ("ESCA") is the Washington,
DC voice for employee-owned S corporations. ESCA's mission is to preserve and
protect S corporation ESOPs and the benefits they provide to the employees who
own them.
About ESCA
ESCA, the Employee-Owned S Corporations of America, is the strong and
necessary voice of the Subchapter S ESOP community in Washington, DC, serving
to protect and promote the American dream of employee ownership in private
Subchapter S businesses for workers across the nation. Shortly after
Subchapter S ESOP companies were first permitted by law, in January 1998, it
became evident that these creatures of statute would require active work by
companies and employee-owners to educate Washington policymakers about the
unique features and concerns of Subchapter S ESOPs, and to protect against
threats that would undermine the unique and important benefits that the
Subchapter S ESOP status conveys to the employees who own a piece of the rock.
In almost ten years, ESCA's membership has grown to nearly one hundred
active members and more than 45,000 employee-owners. They come from virtually
every state in the nation, engaging in a broad spectrum of business activities
that range from the manufacturing sector to the hospitality industry. All
sizes of companies are represented, from large ones with as many as 7,000
employee-owners to small operations with as few as 25 employee-owners. ESCA
companies are a hallmark of American entrepreneurship providing jobs for
millions of American workers.
SOURCE Employee-Owned S Corporations of America

Noelle Lundberg of Employee-Owned S Corporations of America, +1-202-466-4771