The last thing government should ever be doing is providing taxpayer-financed incentives to fix things that aren’t broken. Among her plans to “help” families, including college giveaways, Democratic presidential candidate Hilary Clinton wants to boost middle class incomes by incentivizing firms to share their profits. Under her profit-sharing plan, which she calls “Raising Incomes, Sharing Profits,” corporations that share profits with employees would receive a tax credit equal to 15 percent of the profit-sharing distributions given to employees. Distributions up to 10 percent of an employee’s salary would be eligible for the credit. So, for example, an employee earning $50,000 per year could receive $5,000 in shared profits, which would then entitle the employer to a $750 tax credit.
We’re also told that the credit would phase out for higher earners, that small firms would be eligible for a larger credit, and that the overall credit would be capped to prevent very large companies from claiming excessive amounts. Details about these features have not been released.
I really don’t know how anyone can get excited about this proposal, no matter where they stand on the political spectrum. The implicit message in the Clinton proposal is, I suppose, that corporations are instruments of greed and evil who don’t willingly share profits with their employees. Totally false. They’ve been doing so forever, and in a variety of different ways — profit-sharing plans, bonuses based on corporate performance, matching 401(k) contributions based on corporate performance, employee stock ownership plans, and so on. Anyone who has ever worked for a company of any size knows this.
The Clinton proposal is nothing new or exciting. Just another wrinkle in the employee benefits arena, and a few new pages in the Internal Revenue Code.
Jeff Lerner is a contributing fellow with the National Center for Policy Analysis.