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Buybacks at $46B a Month Dwarf Everything in U.S. Market (2015)

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Re: Buybacks at $46B a Month Dwarf Everything in U.S. Market (2015)

#81

Post by HappyTypist »

makomk wrote: post #67
superuser2 wrote: post #51

Earlier quoted context omitted.

I don't want to be rude, but this doesn't make much sense. Preferential tax treatment for retirement savings accounts was created with the the specific intention of encouraging people to save for retirement, in order to minimize the extent of poverty among senior citizens. It is a feature, not a bug, that these accounts make it difficult to speculate, because the speculation decisions of amateurs and even most profes…

> It is a feature, not a bug, that these accounts make it difficult to speculate Except that IRAs do let people invest their retirement savings in risky speculative investments like buy-to-let properties - they just have to give the IRA holding company a cut of they money in fees and pay someone else to deal with the repairs and maintenance, both of which have the effect of making their returns worse.

The previous poster said it makes it difficult, not impossible. Forcing you to pay fees would be a disincentive and discourage people from speculation

Re: Buybacks at $46B a Month Dwarf Everything in U.S. Market (2015)

#82

Post by rdl »

joshdickson wrote: post #26
sna1l wrote: post #2

Apple buys back a large amount of stock because that is the only way they can really get any return out of their stock ( http://247wallst.com/technology-3/2016/03/01/why-apple-may-s... ). Unfortunately due to the law of large numbers, for them to grow at even a 15-20%, would require billions and billions of dollars in revenue increases. Seems like the most prudent course of action for them and their investors. Albeit…

That's not the law of large numbers.

There are at least two widely used "law of large numbers" -- mean reversion is more popular outside finance, and firm size vs market size is probably more popular within finance.

Re: Buybacks at $46B a Month Dwarf Everything in U.S. Market (2015)

#83

Post by downandout »

adrianN wrote: post #61
downandout wrote: post #56

Earlier quoted context omitted.

>California also taxes long term capital gains (LTCG) at a top rate of 13% I'm sure that Zuckerberg et al have brilliant tax accountants, but this is one thing that has never made sense to me. Volunteering to pay an extra 13% simply for the privilege of living in Northern California seems insane to me. Any of these guys could move a few hours down the road to Tahoe or Reno and save themselves billions of dollars in s…

Maybe they're rich enough that it doesn't matter to them. Whether you make 10 Million a year or 15 maybe doesn't have an impact on your lifestyle at all.

Yes, but at $15M/yr, the 13% is only $1.95M. That's high, but not singlehandedly-supporting-the-government high. In 2013, Mark Zuckerberg paid an estimated $2.3 billion in total income tax [1]. About 40% - nearly $1 billion - likely went to California state taxes - for the mere privilege of living near the beach.

If he wants to give $1 billion in cash away, there are alot better uses than to give it to state government bureaucrats. For example, he could have moved to Nevada, saved the $1 billion, and taken 50,000 homeless people off the streets for a year for that much money (which, by the way is ~10% of the entire homeless population in the United States - imagine the positive social impact of doing such a thing).

The point is that federal taxes are inescapable, while state taxes are not. It makes no financial sense for someone with nine or ten figure tax liabilities to be living in high tax states.

[1] http://www.forbes.com/sites/robertwood/2013/12/20/mark-zucke...

Re: Buybacks at $46B a Month Dwarf Everything in U.S. Market (2015)

#84

Post by mattmanser »

pat2man wrote: post #53
carsongross wrote: post #34

Some day, please let it be soon, corporations will all be treated as big LLCs, with profits/dividends passed through to shareholders proportionally to be taxed at the individual income rates. Couple that with taxing cap-gains as income, since it is, and all this nonsense goes away. Owners (rather than todays "owners") get their share of profits, rich people pay their share in taxes, good triumphs over evil, and so on…

The problem with treating investment profits as regular income is that you can have negative investment profit but you can never have negative income. If I make 100k one year on my investments and loose 100k the next year I effectively paid taxes without making any money.

Yes you can. Do people not eat when they've not got a job? If you're unemployed you have a 'loss', because you have expenditures.

Also, there's an additional hidden loss. I earn $30k last year, with a tax break of $3k, this year I earn nothing because I take the year off to have a baby, I lost $3k in tax break. When I work next year I don't get a $6k tax break. I can't ever make that back. Just because it's hidden, doesn't mean it's not there.

And that's far more expensive than it is to someone taking extreme risks with capital that they can lose/earn $100k in a year.

Also, you already tax your gamblers in the US...

Re: Buybacks at $46B a Month Dwarf Everything in U.S. Market (2015)

#85

Post by sokoloff »

JDDunn9 wrote: post #15
howlingfantods wrote: post #12

Earlier quoted context omitted.

Also, companies that borrow money to finance stock purchases (eg Apple) also save on their taxes because interest expense on debt is tax deductible.

Expensing interest only saves you the total interest x interest rate. So they just get a 35% discount on their interest rate.

Total interest * [marginal] tax rate, not times interest rate.

(I give you credit for knowing the difference, but not every reader will know the difference, so I'm trying to help them, not nitpick you.)

Re: Buybacks at $46B a Month Dwarf Everything in U.S. Market (2015)

#86

Post by Gustomaximus »

onion2k wrote: post #46

A lot of C-level pay is to tied to the company's earnings-per-share. A buyback makes that number go up without actually improving anything. It's a lazy way of getting your bonus. Here in the UK it was illegal for a very long time.

If this is a lazy way for a CEO to meet goals, I'm as concerned how lazy the board is in not putting scenario exceptions in the bonus to allow for stock concentration via buyback. It would be a fairly simple line in a bonus plan. Likewise they shouldn't be punished if share are diluted via raising money on the markets if that is the best things to do at the time.

Re: Buybacks at $46B a Month Dwarf Everything in U.S. Market (2015)

#87

Post by sokoloff »

downandout wrote: post #77
lyncnshare wrote: post #70

Earlier quoted context omitted.

The tax only applies to realized gains. As long as they aren't selling their shares they aren't being taxed. They can also sometimes contribute the shares to tax advantaged vehicles (remember Romney having $101 million in his IRA [1]) or set up other structures to minimize their tax burden. That being said, Northern California is a wonderful place and housing and cost of living prices indicate that many people are wi…

>That being said, Northern California is a wonderful place and housing and cost of living prices indicate that many people are willing to pay to live there. No place is wonderful enough to pay billions of dollars in extra taxes just to live there. If you are a top engineer making $500K/yr, you're only paying ~$65K/yr in CA taxes, and you wouldn't make anywhere close to $500K in other cities. So the decision to live i…

There's the fact that Facebook is headquartered in California, and having to establish and maintain NV residency might be more of a burden than Mark is willing to do. (Imagine that CA will scrutinize that claim carefully.)

If Mark has to stay 183 nights in NV (or stay in NV more nights than anywhere else), that might be more of a personal burden and inconvenience than paying CA tax. And if it harms his ability to lead his company, it might ultimately be more expensive as well...

Re: Buybacks at $46B a Month Dwarf Everything in U.S. Market (2015)

#88

Post by Htsthbjig »

xenadu02 wrote: post #25

So many companies with so much profit they literally can't find any way to invest it to generate return. It might make you wonder why wages are stagnant or what the argument for outsourcing to lower labor costs is really about, if you were the sort of person to bother wondering about such things.

Not so, real profits are low.

Companies are doing buybacks because the Fed is basically siphoning all the wealth to big business and the Government via 0 per cent interest rates.

In the past companies had to offer their stock in exchange of savings. Today The central banks basically finance big corp and Government just printing money(and diluting the currency).

So instead of using your savings, the central banks create new money and give it to their friends at 0 per cent interest rates(lower than inflation, aka: free money).

Their friends take that loan and buy their own shares. That way prices remain up without plunging enough time for the CEO of the company to look like a superstar and nobody complying when she retires with a billion dollars in golden parachutes.

Re: Buybacks at $46B a Month Dwarf Everything in U.S. Market (2015)

#89

Post by sokoloff »

AnthonyMouse wrote: post #28
Animats wrote: post #7

This is a consequence of tax law and greed. There are three ways a company can pay for their capital - dividends, interest, and stock buybacks. The first is taxable. Only the last makes options given to executives valuable. The US should tax buybacks and interest as it does dividends. That would put a stop to this.

All of them are taxable. Interest is taxable income (to the lender), though it's also a prime opportunity for tax arbitrage so the lenders have a strong tendency to be incorporated in low tax jurisdictions. And buybacks effectively get taxed as capital gains (because they result in higher share prices), but not until the shareholders sell their shares, and of course then it's at the capital gains rate. So what you're…

> So what you're really getting at is that dividends and capital gains should be taxed at the same rate.

In large part, they are: https://en.wikipedia.org/wiki/Qualified_dividend

Re: Buybacks at $46B a Month Dwarf Everything in U.S. Market (2015)

#90

Post by Hhefferman1989 »

jensen123 wrote: post #79
cperciva wrote: post #6

Remember, in a perfectly liquid market without taxes, a company which executes a share buyback will have no change in its stock price, since the shared redeemed will be exactly balanced by a reduction in the value of the company; and this is also exactly equivalent to distributing profits in the form of a dividend. On the other hand, when the rate of taxation on capital gains is lower than the rate of taxation on cor…

Even if the tax percent was exactly the same on capitals gains and dividends, buybacks would still make sense. Dividends typically are paid out at least once year. On the other hand, you only incur capital gains when you sell shares. So, with share buybacks, you can potentially wait many years before you pay the tax, having the money accumulate for you in the meantime.

Don't forget the signaling effect, which can significantly boost share price
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