stock repurchase tax -- the line that had me literally jumping up and down

[MissMillie]

Honestly, I thought it was a terrific speech, filled with a lot of good stuff.

Quadrupling the tax on stock repurchase--LOVE IT. It was the line that made me stop doing the other things I was doing and listen to the rest of the speech VERY carefully. It got me--hook, line and sinker.

Personally, I think stock repurchase should be illegal. In my head, it's corporations manipulating the market and is akin to insider trading.

One of the very reasons that "trickle-down" economics doesn't work is because companies have absolutely no incentive to reward their employees with raises and benefits when they can make themselves, their CEOs and their stockholders rich by stock repurchases. Companies have little incentive to provide quality goods and services at competitive prices if they can make huge profits by market manipulation.

I firmly believe that a company's stock should be a reflection of the goods and/or services it provides--not a reflection of how well they can manipulate their own stock.

The middle class has all but disappeared because the working class has been completely left out of the equation.

The companies need to attract customers. And this also means that people have to have enough income to BE customers.

[multigraincracker]

1. A ban on it or a

100% tax.
CEOs are big holders as their compensation is in stock shares.
Last year South West Airlines spent their profits on buy backs and were unable to provide service. I’d rather they split stocks and make them more attractive to small investors to increase value.

[Raster]

8. Southwest Airlines received over $6 Billion in government assistance, subsidies, PPP loans...

...and spent THE VAST MAJORITY on stock buybacks.

[70sEraVet]

2. Stock 'repurchase' -- that's the same thing as stock 'buyback'?

Sorry. I'm not too savvy on this kind of stuff.

[MissMillie]

3. yep (n/t)

.

[BadgerKid]

4. I suspect the cash would just get shifted

To other things such as “executive incentive” programs to avoid a buyback tax.

[fescuerescue]

5. Of course

That money has to go somewhere and there are a millions places it could go.

By taxing stock buybacks, there will only be 999,999 places it could go.

[Wednesdays]

7. So, don't bother trying?

[fescuerescue]

17. Depends on what we are trying to accomplish

But generally I don't advocate for things that I know will fail. If the goal is simply to make executive less wealthy, then this isn't a good plan since it won't accomplish that.

Tell you a little story. I used to work for a company that gave stock options to EVERYONE. From the CEO on down to the janitors. Literally. This was around the time of the Dotcom boom and tens of thousands of regular folks were doing very very well with this company. Literally the best company I've ever worked for.

Then Congress decided that executives were getting a little too wealthy on stock options. So laws were passed that made stock options ALOT more expensive for all companies. The goal being to reduce how many were being issued.

It worked. Stock options became too expensive to give to everyone, so they switch to RSU (restricted stock units), and because even those were much more expensive. Only the executives and high level managers got them. They were taken away from the janitors and 1st line employees like me.

I don't recall if that was the Bush or Clinton administration and I don't recall who had Congress at the time (this was 22 or 24 years ago). But I know who got hurt. And it wasn't the executives. It was regular folks.

So yes. I'm all for "trying". But knee jerk reactions to ill defined goals aren't my thing.

[Orrex]

11. And many, even here among us, would insist that that's just how it is

I was recently amazed when several people argued that a church pastor should absolutely get to write off his private jet because the church is nonprofit and the jet is needed for church work.

[fescuerescue]

18. Which is doubly weird since non-profits

don't pay taxes anyway.

What did they think, they could double zero?

[Orrex]

23. Well, they disputed my argument that the jet was proof of the "chuch's" for-profit work

I asserted that such things as private jets and 8-figure homes and 6-figure stipends are incompatible with the claimed non-profit status of such criminal organizations as Osteen's money-printing enterprise.

Nonsense, they said.

[uponit7771]

6. K&R

[Orrex]

9. Make the buyback illegal in any year that they accept tax breaks or govt assistance

Alternatively, in any year that they execute a buyback, they are ineligible for tax breaks or government assistance.

[Lonestarblue]

10. Don't bother taxing, just make it illegal, as it once was.

[sdfernando]

16. Exactly!!!!

So many people don't even know it used to be illegal for companies to buy back stock until 1982....Lets see...who was President in 1982??...hhhmmmm????

[crickets]

24. 👆 THIS. nt

[Karadeniz]

12. Excellent!!!

[oldsoftie]

13. While we're at it, outlaw institutional short selling.

If you think a stock is overvalued, buy put options. Large scale short selling EASILY manipulates stock prices especially lower cap companies

[fescuerescue]

19. Manipulation is already illegal

Short selling actually stabilizes markets and makes it less likely that small investors lose money.

This is because short selling acts as a major check against stock bubbles. Without that check, the bubbles get much larger and the small investors get hurt even worse.

They just need to enforce the laws against stock manipulation more closely.

[oldsoftie]

21. I watched Martin Shkreli do it "legally". Its not illegal to do what he did but it should be.

Shorting a low volume traded stock WILL manipulate the price downward. He put in a "citizens petition" about a FDA approval. His issues were bogus but the FDA had to take it. The stock tanked from 6.50 to 1.25 and never recovered. He made millions because he shorted the stock before he announced his petition.
Sorry but THATS not illegal but it SHOULD be. It rips off small investors.
Like I said, if you think a stock should be cheaper buy an option. A large volume of Puts would affect a price but not as aggressively as shorting

[Thunderbeast]

14. Stock buybacks are an indication that a company has no new ideas

Corporations go public in order to generate sufficient capital the share the benefits and risks of their idea to create a product or service for customers. When that product reaches the market, consumers reward the corporation with revenues that pay for the costs of production. Profit margins can be used to re-invest in the business to grow or innovate. Profits can also be returned to shareholders (owners) in the form of dividends.

When a business can think of no ways to innovate or grow, they instead may decide to buy their own stock to reduce the number of shares (and shareholders). This artificially rewards executives who are often paid based on the price of individual shares. Raising the share price while reducing shares outstanding may have a neutral impact of total value (market capitalization), but rewards executives.

Current tax policy rewards stock buybacks at the expense of job-creating growth, research, and innovation.

[fescuerescue]

20. It's true. But that describes half the Fortune 500

Maybe more than half.

The most common play for companies that reach this stage, is start growing by acquisition. Usually paid with stock.

If stock buybacks are made illegal, growth by acquisition would likely become even more popular, since these major companies would instead being using the cash to purchase small startups to acquire their ideas and product.

Honestly I don't know if accelerating growth by acquisition would be good or bad. I'd have to think about it for awhile. But I suspect it's unlikely that all that extra cash would be spent on workers.

[Samrob]

15. Brilliant! But there must be solid ways of enforcement...like maybe jail time? nt

[FakeNoose]

22. Corporations aren't allowed to "own" themselves, am I right?

I'll admit that it has been almost 50 years since my college days. But I remember learning in Business Admin 101 that corporate boards had limits on what they were allowed to buyback.