A bipartisan bill introduced in Congress this week would create a new tax incentive for public companies to distribute stock to their rank-and-file employees.
The new SHARE Act would give a 3 percentage point discount on the corporate tax rate to large companies that distribute at least 5% of their stock to the lowest paid 80% of employees. It is cosponsored by eleven members of the tax-writing Ways and Means Committee, both Republicans and Democrats.
“The bottom line is that right now in America, the top 10% of wealthy people in the country own 93% of the stock, and the lowest 50% people in the United States of America own 1% of the stock,” said Rep. Tom Suozzi, D-N.Y., a sponsor of the bill, on CNBC’s Squawk Box Friday.
According to Suozzi, the Share Holder Allocation for Rewards to Employees (SHARE) Plan Act, when fully implemented, could result in nearly $4 trillion in stock value being transferred to almost 40 million middle-class Americans.
For the idea to work, companies would likely have to dilute, issue or buy back their shares to distribute them to employees, said Suozzi. But he argued the cost of that would be firmly offset by the 3% tax rate cut.
“It’s a big idea,” Suozzi said. “It’ll result in some initial dilution of their share price, probably, but once they get the tax rate discount, it’ll result in an increase.”
The new bill could also incentivize employee loyalty, he added, because more workers would hold a stake in the companies that employ them.
For companies with massive market caps, like Amazon or Walmart, Suozzi said they could cap the awards at $250,000 worth of stock per employee, instead of giving the full 5%, depending on which makes more sense economically for the company.
The lower tax rate would be available to companies in a year where they granted at least 1% of their stock, or after they have cumulatively granted at least 5%, according to a fact sheet on the bill.
The value of those distributions would be tax deductible for the companies, and the value of the stock granted to each employee would not be counted as part of that person’s gross income for tax purposes.
Suozzi said the bipartisan support for the bill shows how Republicans and Democrats are coming together to “stop attacking each other and start attacking the problems that we face.”
“We need to expand the ownership society in our country so that people who go to work every day can participate in the great success of this great country,” said Suozzi.
