Employee stock purchase plans (ESPPs) are designed to promote employee stock ownership broadly within the firm and provide another tax-deferred vehicle for individual capital accumulation in addition to traditional pensions, 401(k)s, and stock options. We outline the individual and corporate tax treatment of ESPPs and the circumstances under which ESPPs will be preferred to cash compensation from a purely tax perspective. We then examine empirically ESPP participation using administrative data from 1997-2001 for a large health services company that employs approximately 30,000 people. The picture that emerges from the analysis of these data suggests that there is substantial non-participation in these plans even though all employees could increase gross compensation through participation. We discuss a number of potential explanations for non-participation.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
10421.
Length: Date of creation: Apr 2004 Date of revision: Handle: RePEc:nbr:nberwo:10421
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Find related papers by JEL classification: H2 - Public Economics - - Taxation, Subsidies, and Revenue J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
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Ted O'Donoghue & Matthew Rabin, 1999.
"Doing It Now or Later,"
American Economic Review,
American Economic Association, vol. 89(1), pages 103-124, March.
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