The following ran as the Washington Report column in the March 2012 issue of the ESOP Report, the newsletter of The ESOP Association. A copy of the ESOP Report can be downloaded from the members only section of the Association’s website.
When Senator Olympia Snowe announced, unexpectedly, that she was not going to seek re-election, many persons dedicated to ESOPs and protecting ESOPs against misguided attempts by certain “experts” to eliminate, or curtail, ESOP promotion laws contacted me wondering, “Will this be very bad for us to lose this super champion?”
[While most readers of this column follow the Association and its members’ efforts to keep ESOP law strong, to refresh memories, Senator Snowe made an unequivocal pronouncement last fall pledging to protect current ESOP law during tax reform. The Association posted this pledge on its YouTube Channel, (to view the video, use this link youtu.be/8H-RAtdvji0) and noted that in its 35 years of work for positive ESOP law, no member of Congress has ever made such a pledge for ESOPs. Most members of Congress hedge their bets on how they will conduct themselves in the private meetings where tax laws are truly hashed out, as no one can predict precisely what proposals will be in front of the legislators. It is important to note, in no Congressional district in the U.S., nor in any state of the U.S., are ESOP companies so numerous to be a major economic factor.]
And what many may not realize, there are more members of Congress than ever in history having taken public positions in support of pro-ESOP law and regulation; 160 at last count. Of that 160, ten have announced retirement or have been defeated for re-election in a primary, and thus will not serve in Congress beginning in 2013 when consensus view is serious work will begin on tax reform, and ESOP law will be reviewed for possible change. And that list will grow to 12 in a few weeks as four ESOP advocates are facing off in primaries to be held before the end of March. It is easy to predict that the 12 can be as high as 20, up to 30, by year’s end.
But, let the ESOP community not fret; while the media seldom makes this point, turnover in the Congress is greater than the general assumption. A good way to think about turnover in Congress is not to count how many new members there are every two years, but to think of “compound interest.” Anywhere from five to ten percent of House and Senate members retire and/or are defeated every two years. In three election cycles, or six years, the number of relatively “new” members of Congress falls anywhere between 75 to 144 persons.
And, the ESOP community, when it had far fewer friends in Congress, suffered a much more dramatic development when former Senator Russell B. Long, the godfather of ESOP promotion law, retired in 1987. Many in the ESOP community felt that with his retirement it was going to be curtains for ESOPs.
But it was not, and really in the past 14 years, only positive new law has been enacted for ESOPs. [Senator Long said to representatives of The ESOP Association upon sensing a fear of losing upon his retirement, “If the ESOP people cannot protect and preserve positive ESOP law after I leave, then ESOPs do not deserve to keep those laws.”]
In sum, Senator Snowe leaving Congress is a stumbling block for protecting ESOPs. As the old maxim goes, however, the ESOP community should make its stumbling blocks its stepping stones. So, expect, as in prior years, the strong grass roots voices of the ESOP community to respond effectively after losing friends in Congress.