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L<et us glance at fne existing discriminations in favor of employee pension plans and stock option arrangements.
Private pension plans have experienced great growth in recent years. In 1940, approximately 4,000,000 workers were covered. Now, about 19,000,000 ire covered. The bode value of tthe assets of private pension funds was approximately $2.5 billion in 1940. This value now is approaching $40 billion, according to testimony given our committee.
In 1958, we were told, employers contributed nearly $4 billion to such plans, while employees paid in $710 million. The employer’s contributions are deductible by him for tax purposes. The earnings of the pension fund, likewise, are not subject to income tax when earned. The employee does pay income tax on his own contribution to the plan but he does not pay any tax on what has been placed to his credit in the fund by the employer, or what the fund has earned for him through investments, until that future retirement year when he begins to draw benefits. At that time, the employee may expect to be m a substantially lower tax bracket, so his tax liability is significantly leas.
This postponed tax liability on the employer cont^hutkms to a pension fund, and on die earnings of the fund, may be viewed as an interest-free loan of the .money which die Government would have collected if income tax were imposed on these contributions and earnings at the time they entered the fund. As only 27.7 percent of the civilian labor force is estimated
63.2%