White House Wants Higher Taxes On Buybacks

In his State of the Union address, US President Joe Biden called for a quadrupling of the tax on buybacks — up from the current 1% implemented by the Inflation Reduction Act.

Photo Insert: People like Paul Singer, who have nothing to do with these companies but hold shares and make a ton of money by exerting pressure on these companies, are cited as the problem.

But corporations insist they use repurchases to efficiently distribute excess capital, Nicole Goodkind reported for CNN Business.

Limiting buybacks, say supporters, could reduce the liquidity in stock markets and hit share prices. Executives typically use buybacks to reduce the number of shares available for purchase, thus increasing demand for their stock and raising earnings per share.

Even if Biden's tax increase were to pass, it wouldn't address the root problem with buybacks, said William Lazonick, president of The Academic Industry Research Network.

"The pressure on the executives to do buybacks is coming from hedge fund activists," said Lazonick, a longtime critic of buybacks and a professor of economics at the University of Massachusetts Lowell.

"The problem is Carl Icahn, Daniel Loeb, Paul Singer," he said. "These people have nothing to do with these companies. They hold shares and make a ton of money by exerting pressure on these companies."

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