S&P 500 Buybacks Now Outpace All R&D Spending in the US

Post by zaroth » Wed, Dec 11, 2019, 3:30 PM UTC

brianwawok wrote: post #35

entropicdrifter wrote: post #14

Earlier quoted context omitted.

You tax the buyback itself, right? You tax the money the company is spending on its own stock. That's the only step of the transaction where money is changing hands

Isn’t that a double tax? Taxed at buyback time, and taxed when shareholder cashes out and realizes their gain? Though I guess a small (10%??) tax could still make buyback tax + dividend long term gains is still less than normal income tax.

Post by scresswell » Wed, Dec 11, 2019, 3:32 PM UTC

jcims wrote: post #52

Every time i read these threads i feel criminally incompetent in finance. You would think that putting your money to work for you would be incentive enough to dig deep, but i don’t seem to have the mental stamina to figure it all out. There’s probably a latent fear that I’ll also realize just how much money i haven’t made and regret that too. I need a course or something that i can walk into with $20k or whatever and…

Post by [deleted] » Wed, Dec 11, 2019, 3:33 PM UTC

coldcode wrote: post #22

nabla9 wrote: post #3

> drowning out real investment. The conclusion that buybacks are alternative for real investments is wrong. The aggregate change between R&D and capex versus buybacks and dividends is not just some arbitrary decision. ROI from R&D and investments is slowing down for various reasons. Instead of investing more without reason to do so, companies should give profits to owners or pay off excess debt. There is wrong and ri…

Companies (often ones with business both in and outside the US) generally borrow money to pay for buybacks (Apple as an example). So corporate debt goes up, paid out of future earnings if they exist, to keep the stock price up and keep shareholders happy. But it is not making business value which ultimately is what business exists for and should reflect in the stock price. So the price is propped up for some time per…

Post by tw04 » Wed, Dec 11, 2019, 3:33 PM UTC

crazygringo wrote: post #55

try-perforate wrote: post #4

Read an idea in American Affairs in support of taxing buybacks. The logic goes that if all companies have a fiduciary duty to shareholders because the market is the most efficient capital allocator, AND all companies are giving their cash back to shareholders, THEN it must be true that the market can not figure out how to efficiently allocate this $1T of capital. Thus, the government should have “next dibs” for items…

That doesn't make any sense. The market is the most efficient capital allocator because shareholders are the market, not companies. Companies are giving their cash back to shareholders because each individual company thinks their shareholders can better allocate the cash, rather than the companies themselves. This is equally true for both buybacks and dividends. This is because most companies have no wish to operate…

Post by rayiner » Wed, Dec 11, 2019, 3:35 PM UTC

jjoonathan wrote: post #20

mrep wrote: post #8

Earlier quoted context omitted.

The government already gets first dibs through corporate income taxes. Buybacks aren't deductible from that.

Isn't corporate income tax the one that can be dodged by just shifting profit offshore? Or did they close that loophole?