Paul L. Caron

Tuesday, February 19, 2019

Hemel & Polsky: There’s A Problem With Buybacks, But It’s Not What Senators Think

Daniel Hemel (Chicago) & Gregg Polsky (Georgia), There’s a Problem With Buybacks, but It’s Not What Senators Think, 162 Tax Notes 765 (Feb. 18, 2019):

In a deeply divided Washington, one of the few issues on which leading lawmakers on both sides of the aisle appear to agree is that corporations should be discouraged from buying back their stock from shareholders. Earlier this month, top-ranking Democratic Sen. Charles E. Schumer of New York, along with Vermont independent Sen. Bernie Sanders, unveiled the outline of a proposal that would bar companies from buying back their shares until they pay all workers at least $15 an hour and offer a suite of healthcare, sick leave, and retirement benefits. On February 12, Florida Republican Sen. Marco Rubio — who has criticized buybacks in the past — announced that he wants to change the tax treatment of buybacks as part of a plan to make U.S. industry more competitive.

When everyone from the self-described Democratic socialist Sanders to the mainstream conservative Rubio sees buybacks as a bugaboo, one might think that there is a real policy problem here, and there is. But it’s a different problem than the one that the senators have seized upon. And if the senators solve it, that will likely be by accident.

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It's dismaying that politicians (who can't run government) feel qualified to advise businesses on business decisions. If government were a private business, it would have had to spin off the military (as about the only division that provides a generally recognized value to the customers), and then declared bankruptcy hundreds of times.

Posted by: ruralcounsel | Feb 20, 2019 3:57:56 AM

Wait wait .If the Amazon stock of Jeff Bezos is included in his estate, it would be taxed at 40%, after an exemption amount insignificant to the stock value. If the stock is not included in his estate, perhaps because it is in an irrevocable trust, it would not receive a step up in basis.

Posted by: Markymark | Feb 19, 2019 10:48:58 AM

I'm sorry, but I I was told that corporations were terrible at buybacks because they always bought high.

If they want to light their money on fire, why are people complaining?

Posted by: Anon | Feb 19, 2019 9:32:15 AM