The term "tax breaks" was used in a few instances in commentary on the Tribune/Sam Zell ESOP. We know that the major tax advantages include a deduction for principal and interest to payoff the ESOP debt, a tax free rollover for the selling shareholder, and the non-taxability of the ESOP’s share of corporate profits for S corporation ESOPs. All, of course, subject to specific limitations under the tax laws. So ignoring the public policy reasons for ESOPs for purposes of this discussion, how much exactly did these "tax breaks" cost the Treasury?
The answer which may surprise you is less than the cost of the exclusion from tax of reimbursed employee parking expenses. The Office of Management and Budget has calculated the cost of special ESOP 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.
Hat tip to Corey Rosen, Executive Director of the National Center for Employee Ownership (NCEO).
