Dear John,

Stock buybacks don’t create more jobs. They don’t increase wages. They don’t grow the economy. They do just one thing:

Make corporate executives and shareholders richer.

It used to be illegal for corporations to purchase their own stock to artificially prop up share prices. That is until 1982, when Ronald Reagan’s SEC adopted a rule protecting corporations from being charged for this kind of stock manipulation.

Jump ahead to 2017 and the Trump-GOP tax cuts added fuel to the fire -- a LOT of fuel. Stock buybacks have more than doubled, reaching a record high $1.2 trillion in 2022 alone.

That’s $1.2 trillion that did not go into improving quality of life for American workers or building the American economy. It just went straight into the pockets of already-wealthy shareholders and CEOs.

Once again, Wall Street gains at the expense of working families.

Now, the Stock Buyback Accountability Act of 2023, introduced by Senators Sherrod Brown (D-OH) and Ron Wyden (D-OR), would place a 4% tax on stock buybacks, to help discourage the artificial inflation of stock prices, and encourage corporations to invest in workers.

It’s time we held corporations accountable for their misuse of windfall profits. Tell your senators to become co-sponsors of the Stock Buyback Accountability Act of 2023!

Back when the Securities Acts of 1933 and 1934 were passed, corporations would plow as much as half of their profits into research and development, plant and equipment, worker retraining, additional jobs, and higher wages.

These investments helped grow the economy and improve workers’ conditions.

Now, according to the Academic-Industry Research Network, in the past ten years, 94% of corporate profits have been devoted to buybacks and dividends instead.

Buybacks don’t enhance the underlying value of the company, but CEOs love stock buybacks because most CEO pay is now in stock shares and stock options rather than cash. So when share prices go up, so does their compensation. And the value of their pay from previous years rises at the same time -- a huge retroactive pay increase, on top of their already outrageous compensation.

Needless to say, stock buybacks mostly enrich top corporate executives and other wealthy shareholders. That’s because about 90% of all corporate stock is owned by the richest 10% of Americans; over half is owned by the top 1 percent.

This isn't just unfair. It's also bad for the economy as a whole. When Corporations get tax cuts, it doesn’t suddenly make them invest in growth and development. Now with companies using profits to buy back their own stock instead of investing in efficiencies, improvements, and employees, the system gets further rigged in favor of the ultra-rich, expanding economic inequality even more.

Corporations have spent $4.2 trillion on stock buybacks in just the last 5 years. That’s money that should have been used to raise workers’ wages, invest in workplace protections and public safety, and lower costs for consumers. By doubling the taxes on stock buybacks, we can create an incentive for corporations to invest in workers instead of Wall Street.

Let’s tip the scales back toward working families and away from excessive CEO greed. Send a message to your senators now and urge them to become co-sponsors of the Stock Buyback Accountability Act of 2023.

Thank you for doing your part to improve workers’ lives and the American economy.

Robert Reich
Inequality Media Civic Action