Democrats have pulled off a quiet first in their just-passed legislation addressing climate change and health care: the creation of a tax on stock buybacks, a cherished tool of Corporate America that had long seemed untouchable.
Under the bill President Joe Biden is scheduled to sign into law Tuesday, companies will face a new 1% excise tax on purchases of their own shares, effectively paying a penalty for a maneuver that they have long used to return cash to investors and bolster their stock price. The tax takes effect in 2023.
Buybacks have ballooned in recent years — they’re forecast to reach $1 trillion in 2022 — as companies have swelled with cash from sky-high profits.
Democrats say that instead of returning cash to shareholders, big companies should use the money to increase employees’ wages or invest in the business. They are hoping the excise tax — it’s projected to bring the government an additional $74 billion in revenue over 10 years — will cause a major shift in corporate behavior.
Best in Moderation
Article URL : https://apnews.com/article/biden-elizabeth-warren-bernie-sanders-congress-5e5ea68a4b5c1f4f263f5516bcdf8f77