OK. You're probably right. I still hate it. There's not a viable explanation that doesn't make it seem shortsighted and greedy (personally, and possibly due to HN filter). Why is R&D not a good investment suddenly? Shortage of tech workers (blah blah) ...?
Toxic individualism. Me above all. Consequences are for chumps. And it's all so cynical. We see this in politics as well. One last dash pillaging the world for money and power, burning it down to the ground in the process.
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…
The point is both the companies in question and the ultra-wealthy that are the beneficiaries of the vast majority of these buybacks AREN'T paying taxes, so it's another way for the government to at least attempt to capture the $$ that should already be going into the treasury instead of offshore accounts/subsidiaries/whatever double dutch triple lux tax evasion scheme of the month they're using.
The beneficiaries of these buybacks are the general public, these are public companies. They are your pension funds, your rainy day funds, they are government healthcare programs, Norway's Oil fund... They are everyone. The reason they aren't paying taxes on buybacks is because they haven't actually made any money until someone sells stock.
You tax the buyback itself, right? You tax the money the company is spending on its own stock. That's the only step of the transaction where money is changing hands
Isn’t that a double tax? Taxed at buyback time, and taxed when shareholder cashes out and realizes their gain? Though I guess a small (10%??) tax could still make buyback tax + dividend long term gains is still less than normal income tax.
Everything's a "double tax", but people only care sometimes, for whatever reason.
There's two ways to look at everything. Buybacks can be seen as companies giving money back to the shareholders. Or if you decouple the company from it's stock, you'll see that buybacks are an investment in the company's own future, since they believe that their own stock is at a discount now, and they'll make more selling it later.
Buybacks are to increase mgmt comp because they hold options. It’s a scam.
The point is both the companies in question and the ultra-wealthy that are the beneficiaries of the vast majority of these buybacks AREN'T paying taxes, so it's another way for the government to at least attempt to capture the $$ that should already be going into the treasury instead of offshore accounts/subsidiaries/whatever double dutch triple lux tax evasion scheme of the month they're using.
How are they not paying taxes? The people selling their stock to the company in the buyback have to pay taxes on any gains and the people holding onto the stock long term will eventually have to pay taxes on any gains when they finally do sell (they're not going to hold onto a stock until the heat death of the universe so they are going to realize their gains and pay taxes on them at some point).
The companies are in many cases doing things like this:
1) their revenue they classify is centered in a different country like Ireland
2) they setup a massive line of credit with an international bank
3) they take out massive loans against the money they have “overseas” that is not taxed
4) they then pay the buybacks and other things to their investors with that loaned money in US
5) they then pay back the bank at their international site
6) the bank then borrows more money from federal reserve at nearly zero interest rate
Rinse and repeat.. tons of companies have done this. So sure some investors will eventually cash out but companies should also be taxed if they derive some benefit from the country they are from or selling products. I would argue those taxes should be low but allowing companies to totally dodge them seems like a bad setup long term.
At the very minimum it should be taxed the same as dividends. Essentially tax buybacks are a tax loophole for giving money back to the shareholder.
This is correct. Stock buybacks are just a way of doing dividends that is more tax advantaged. The right answer isn't to introduce new forms of buyback taxes with unknown second-order effects (who would you tax? if the shareholder is avoiding dividend taxation, taxing the corporation isn't a great solution). The solution is to just improve the way we tax dividends and capital gains.
I agree with this entirely. If you tried to tax buybacks, you'd likely be inadvertently taxing a ton of the corporate infrastructure used for administrative purposes. In this case, the buyback is clearly like a tax-advantaged dividend, but with a key difference: it's not liquid. Dividends cross that critical threshold of spendable cash that triggers taxation.
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.
Triple actually. Corporate profits tax, new hypothetical buyback tax, and then again as capital gains when the shareholder sells.
I pay taxes on my income, on my purchases, on my property and again on my property’s appreciation when I sell.
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…
The point is both the companies in question and the ultra-wealthy that are the beneficiaries of the vast majority of these buybacks AREN'T paying taxes, so it's another way for the government to at least attempt to capture the $$ that should already be going into the treasury instead of offshore accounts/subsidiaries/whatever double dutch triple lux tax evasion scheme of the month they're using.
The largest beneficiary of buybacks isn't the ultra-wealthy. It's retirees. It's grandma:
"Of the $22.8 trillion in stock outstanding... retirement accounts owned roughly 37%, the most of any type of holder." [1]
That doesn't make any sense. The market is the most efficient capital allocator because shareholders are the market, not companies. Companies are giving their cash back to shareholders because each individual company thinks their shareholders can better allocate the cash, rather than the companies themselves. This is equally true for both buybacks and dividends. This is because most companies have no wish to operate…
The point is both the companies in question and the ultra-wealthy that are the beneficiaries of the vast majority of these buybacks AREN'T paying taxes, so it's another way for the government to at least attempt to capture the $$ that should already be going into the treasury instead of offshore accounts/subsidiaries/whatever double dutch triple lux tax evasion scheme of the month they're using.
Corporations are paying taxes. US corporate tax receipts as a percentage of GDP are a tick higher than the OECD average. Also, it’s not the “ultra wealthy” primarily benefitting from these buybacks. Most corporate equity is owned by the bottom 99% and pension funds.[1] (Someone with a $5 million retirement account may be very comfortable, but they’re not hiding their money in offshore accounts.)
[1] Most corporate equities are held by retirement plans or foreigners. Just 25% are held in taxable account. Of those, the bulk is owned by people outside the top 0.1%.
Large US corporations have been buying back their own stock in record amounts, while investors have been cashing out of US stocks at a record pace , recent data shows: https://www.msn.com/en-us/money/markets/investors-bail-on-st... -- money is not being plowed back into IPOs, secondary offerings, etc. According to orthodox economic theory , large US corporations must be buying back stock with earned profits and new d…
Doesn't one require the other? You have to buy back the stock from someone. That someone is necessarily divesting themselves of the stock as a result.