Enron's Employees Have Been Victimized

by Chris Erickson

Much has been written, proclaimed, and professed about the Enron mess, including in a wide variety of libertarian-minded publications.  It seems, however that one detail has been missed.  Were it not for the IRS’s mind-numbing tax code, the whole system of employer-employee retirement plans would not even be necessary.

A 401(k) plan allows both the employer and the employee to divert tax-deferred money into an equity account.  Because of the money that the employer contributes to the plan, it does have a fair amount of leverage over the account, including the right to halt trading of company stock options. 

Lets look at this from a new angle.  If not for the need to avoid income taxes, why would an employee choose to buy stock options that may become locked up in a corporate bureaucracy?  It would be far more prudent to collect one’s entire paycheck and pick a balanced portfolio of stocks that can be bought and sold at any time.

As is usually the case, the statists have found a way to make it look as though this was a situation where more government intervention was needed.  The truth, however, is that government created this mess, and as usual, government will not be able to clean it up.  It is almost inevitable that more government is going to be created in the wake of this situation.  The Securities and Exchange Commission will have to be enlarged.  The IRS will have to beef up its operations.  Maybe even the FBI will need to grow to keep up with all the new “corporate fraud” that is being discovered by our fair and unbiased mainstream media.  In the end, it will all be for nothing.  As long as there are taxes to be avoided, goofy accounting will be the standard, and the Enron mess will be repeated.

To what lengths should the government go in order to make its ridiculous taxation scheme work?  With every new tax code created, someone somewhere is put in a bind.  Since our compassionate government does not like to see people in binds, it creates a new program for this person.  This program is usually either a subsidy or some sort of strange circumvention of the original tax code, as is the case with the 401(k) system.  Wouldn’t it be better just not to collect the tax in the first place, and skip the whole process of subsidizing, circumventing, and redistributing?

It should not be inferred from this that no wrongdoing took place.  If those executives did what has been alleged, then they certainly are scumbags.  What is important to understand here though, is that they would not have been able to do what has been alleged if they had not had thousands of employee-stockholders held captive by a government-imposed retirement scheme.

February 6, 2002

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