President Biden Proposed to Quadruple the Stock Buyback Tax

CEO’s have been giving themselves huge bonuses through stock buybacks for far too long – but taxing this practice will raise revenue that could benefit the public.

Stock buybacks hit a record $1.2 trillion last year, and it’s predicted that corporations will smash that record again in 2023. This jaw-dropping number represents the worst of corporate greed – because the truth is, these stock buybacks are a way for super-rich executives to give themselves huge bonuses with no strings attached. The good news is, President Biden just proposed to quadruple the tax on stock buybacks, and U.S. Senators Sherrod Brown and Ron Wyden have already introduced a bill to do just that.

There are plenty of places that companies can put their profit – like raising wages, lowering prices, or making investments in their own companies. But time and again, CEO’s choose to pad their own pockets through stock buybacks. Southwest, for example, spent $5.6 billion in the years leading up to the pandemic rather than investing in infrastructure that would prepare the company for bad weather. Last holiday season, travelers paid the price: The company canceled more than 5,000 flights in the last week of December, taking weeks to get back on track because their teetering old tech systems were on the brink of collapse.

There are hundreds of other examples of executives choosing to spend money on stock buybacks when they could be making badly-needed investments in their own companies. Meta spent $40 billion on stock buybacks after laying off 13% of its staff. Chevron just spent $75 billion on stock buybacks instead of lowering the price of their gas. And, we recently learned that Norfolk Southern – the company responsible for the recent train crash in Ohio that sent toxic fumes into a nearby town – spent $10 billion on stock buybacks rather than investing in safety improvements prior to the derailment.

And that’s all just from the past few weeks. After Reagan opened the floodgates on stock buybacks, CEO pay has skyrocketed: Over the past four decades, $50 trillion has been redistributed from the bottom 90% of Americans and has gone straight to the top 1% of all Americans. And now, middle and working class Americans have less money in their pockets to spend on local businesses, which means our economy as a whole suffers.

President Biden’s proposal to quadruple the stock buybacks tax is a step in the right direction. Taxing this exploitative practice would make stock buybacks less profitable for wealthy executives while also raising revenue that the government could use on programs that benefit the public as a whole. It’s a middle-out strategy that will build a stronger, more inclusive economy that works for everyone – not just the super-rich.

Thanks for reading! If you’re interested in learning more about stock buybacks, listen to this episode of our Pitchfork Economics podcast featuring Senator Cory Booker.