Watson Coleman Bill Would Give Raises to American Workers

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Washington, September 28, 2018 | Courtney Cochran - 202-225-5801 | comments

In an effort to incentivize corporate practices that will grow wages for those below the C-suite, Congresswoman Bonnie Watson Coleman (D-NJ) today introduced the Employee Profit-Sharing Encouragement Act, legislation that would require companies with more than $25 million in annual earnings to set up profit sharing plans in order to be eligible for certain tax breaks.

The Employee Profit-Sharing Encouragement Act would bar companies that meet the threshold of $25 million in earnings from deducting executive compensation expenses unless those companies institute a profit-sharing plan. At least five percent of qualifying companies’ annual net income would be used to provide cash payments to employees who’ve been with the company for one year or more.

The bill is narrowly tailored to cover only large businesses, exempting 99.7 percent of American companies  to ensure no small businesses are held to an unmanageable standard. The remaining .3 percent of companies employ 51 percent of American workers — meaning an estimated 65.4 million individuals would see their pay increase immediately under this legislation.

“We have massive companies boosting salaries for their executives and shelling out funds to shareholders, ignoring the majority of their workers and contributing to the national crisis of wage stagnation that’s keeping people out of the middle class. That’s a problem that we have the tools to solve and requiring profit sharing is one way we can do it,” said Watson Coleman. “Our tax code is riddled with giveaways for corporations, everything from letting companies borrow from offshore subsidiaries to deductions for ‘manufacturing’ claimed for making burgers or grinding coffee, and Republicans have used their tax scams to add even more. For all the breaks they get, these companies can and should be investing in their workers — and since they’re unwilling to do so on their own, it’s time for Congress to step in for the people.”

The Employee Profit-Sharing Encouragement Act  ensures fair treatment in profit sharing plans across all employees with provisions similar to the rules already applied to 401k plans, specifically requiring the average amount of distributions to non-highly-compensated employees to remain in a reasonable range of distributions made to highly-compensated employees — preventing companies from gaming the system by sharing more of their profits with the executives who already make the highest salaries.

In addition to increasing real wages for employees, profit-sharing plans have also been proven to benefit the company. Recent data shows an increase in worker productivity of between 4-5% after implementation of a profit-sharing plan.

With income inequality and wage stagnation at all-time highs for middle class families even as high-wage earners have seen stratospheric increases in pay, Employee Profit-Sharing Encouragement Act would help level the playing field and ensure more American families feel the benefits of economic growth.

To view the text of the bill, click here.

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