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Scott Paeth
Scott Paeth teaches Religious Studies at DePaul University
Interests: Film, Cycling, Role-Playing and Computer Games. You know, geek stuff.
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Mar 15, 2010
Larry, You and I clearly have a difference of opinion on the implications of these kinds of policies. There is a difference between offering a tax credit to an employer for hiring new employees and taking advantage of provisions in the tax code that allow you to get a tax break from holding these life insurance policies. Even if the end result were the same, on a dollar-per-dollar basis, how you get there is not irrelevant. A couple of questions occur to me at this point: 1) What was the original intention of the tax code provision that these employers are taking advantage of? 2) If it was simply to give a tax break to employers for taking out life insurance policies on their employees, of which the employees werent the beneficiaries, that seems awfully cumbersome. Why not just offer the direct tax break, as you suggest? 3) If these insurance policies existed just for the sake of the tax breaks, why not make the employees beneficiaries, thus offering them a benefit in exchange for the tax break? 4) Furthermore, why not make the whole process transparent from the get go, telling the employees about the policies? As I suggested earlier, my guess is that, absent a benefit, the employees wouldnt consent. 5) In any event, why not seek the employees consent? Why do the whole thing without the employees knowledge? 6) If this is in some way preferable as a means of giving companies tax breaks, how is it so? Why does it work better as a means of giving companies tax breaks? 7) Furthermore, why do companies deserve tax breaks for taking out this kind of insurance in the first place? 8) If, as your hypothetical suggests, the goal of the tax break is to increase employment, Id like to know if in fact companies increase employment as a result of these tax breaks, or simply take out policies on existing employees? 9) Presumably the difference between dead peasant policies and a direct tax-break for employment is that the latter is intended to be a direct stimulus to the economy, by virtue of encouraging the hiring of employees. If thats the case, what incentives do dead peasant policies give employers? As I say, you clearly see this differently than I do. But my suspicion of these policies is rooted in these kinds of questions. Scott
Toggle Commented Dec 21, 2009 on Dead Peasants at Against the Stream
The question you raise has to do with agency and consent. The employer gets no benefit from the employees death, but neither does the employee or his/her heirs. Meanwhile, the employer DOES get a benefit from the life insurance policy, about which the employee doesnt know, and from which the employee does not benefit, and to which the employee does not consent. So the question is, should the employer gain benefits from the mere presence of the employee on the payroll, to which the employee does not consent and from which the employee does not benefit. Its not clear to me that the employer even has the right to do things that are transparently beneficial to the employee without the employees consent, let alone things that dont benefit the employee. My guess is that, if you explained the whole thing to your employees, with full transparency, most employees would not consent to having these policies taken out on them, from which they do not benefit. And its for this reason that the employers dont tell the employees. If you actually offered some benefit to the employees, they might consent. And, to be clear, as youve stated well, the employer does in fact accrue a benefit from the policy in the form of a tax break. But this is all good food for thought, and I think I now have a paper topic for next falls Vincentian Business Ethics conference!
Toggle Commented Dec 20, 2009 on Dead Peasants at Against the Stream