In Policy Brief to Members of Congress, SMLR Professors Unveil Bipartisan Tax Reform Ideas to Strengthen the Middle Class

Congress and the Trump Administration can boost middle class incomes by incentivizing companies to adopt profit sharing and employee share ownership, two Rutgers School of Management and Labor Relations professors wrote in a policy brief released this week by the centrist think tank Third Way and delivered to members of the U.S. House and Senate. 

“Middle class wages and incomes have been generally flat or declining since the 1970s, while many of the economic gains have not been going to the working middle class,” said Joseph Blasi, the J. Robert Beyster Distinguished Professor at the Rutgers School of Management and Labor Relations. “Research shows that most of the wealth in the economy is realized by citizens who have investment assets or access to an equity or profit stake in a business.”

The new report, Having a Stake: Evidence and Implications for Broad-based Employee Stock Ownership and Profit Sharing, chronicles the history of shares in the United States and outlines a series of evidence-based policy ideas for Congress and the White House to consider when drafting a tax reform bill later this year. They include:

•Enacting tax incentives that encourage companies to offer broad-based profit sharing or employee share ownership to their employees;

•Amending Internal Revenue Code 162(m) to eliminate the deduction for top executive pay, except for companies that offer broad-based profit sharing or employee share ownership (these deductions cost the U.S. Treasury an estimated $5-10 billion per year); and

•Creating an office in either the executive or legislative branch to ensure there is adequate data, research, and analysis on the wide range of policy options concerning shares.

“This report draws on decades of empirical research about the impact of shares on employees and companies,” said Douglas Kruse, a Distinguished Professor and the J. Robert Beyster Faculty Fellow at the Rutgers School of Management and Labor Relations. “Studies show the combination of employee shares and a supportive corporate culture can improve company performance and employee wealth.” 

Professors Blasi and Kruse co-authored the report with Professor Richard Freeman, the Herbert Ascherman Chair in Economics at Harvard University. Blasi, Kruse, and Freeman previously collaborated on the book, The Citizen’s Share: Reducing Inequality in the 21st Century, published in 2014 by Yale University Press.

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