Larson looks to stocks to help address wealth gap
SHARE Plan Act calls on companies to sell more to middle- and low-wage employees
Majority Democrats in Congress looking to bridge the wealth gap in the U.S. are considering a proposal that would let workers profit from Wall Street’s impressive gains.
The SHARE Plan Act proposed by Rep. John Larson, D-1st District, would give an incentive to companies to distribute more stock to middle- and low-wage workers by allowing shareholders to claim long-term capital gains treatment on stock sales. Shareholders would otherwise pay at higher ordinary income tax rates.
Companies would be required to have a minimum of 10% of stock granted to at least 80% of employees below senior management. The legislation applies to all publicly traded companies and private companies with 500 or more employees.
Shares would be granted over no more than five years, a nod to opponents who cite the decline in the value, or dilution, of a company’s stock that typically follows the issuance of more shares. By phasing in stock grants over five years, “the markets are going to be very forgiving about dilution,” said Robert Patricelli, a retired health care executive who proposed the idea to Larson.
Larson says his plan would result in the transfer of an estimated $6 trillion in stock value to the middle class.
“This seems to be a very straight, practical, pragmatic way to do this,” he said.
While some Democrats prefer to redistribute income by raising taxes on the affluent to fund government initiatives, Patricelli said he developed the distinctly capitalist approach of using Wall Street to enrich workers after reading what he said were inadequate proposals from last year’s presidential candidates. In August 2019 he wrote an op-ed for The Hartford Courant that urged a new approach to avoid a “wealth tax” or rolling back income tax cuts signed into law in 2017 by then-president Donald Trump.
The proposals “will do little to recut the wealth deck,” he wrote.
The challenge is to reverse inequality in wealth created by Wall Street. The top 1% of household wealth in the U.S. accounted for nearly 54% of stock and mutual fund ownership in the first three months of 2021, while the bottom 50% held a fraction of 1%, according to the Federal Reserve Board.
As a result, tens of millions of Americans have missed tremendous gains on Wall Street. In the past 17 months, the S & P 500 index, a broad measure of stock market performance of 500 companies, has surged more than 77% as investors look to robust economic growth following the pandemic.
“The great wealth In this country comes from appreciation of stock,” Patricelli said in a phone interview Monday.
Larson, a 12-term incumbent who may be challenged next year by liberals in his party, said the politics of his legislation are “entirely positive.”
“I think you’re going to be hard pressed to find detractors of transferring wealth from the owners of companies to their employees,” he said.
At the same time, he called it a bipartisan approach promoted by Patricelli, a retired executive who served in the administration of Republican President Gerald R. Ford.
Patricelli, former CEO and chairman of Women’s Health USA, a provider of services to physician groups who treat women, is no stranger to public policy debate, He and retired Webster Bank CEO Jim Smith in 2018 drafted a blueprint to power Connecticut’s economic development.
This time around, he’s again searching for a solution that would win support from Democrats and Republicans.
“The idea occurred to me it’s possible to develop a bipartisan coalition,” Patricelli said.
Larson’s legislation must compete with other, larger proposals in Congress, such as the economic rescue plan and $2 trillion infrastructure bill.
“It’s a long way to Tiperrary, but we’ve dropped the bill,” he said.