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

Buybacks are effectively taxed at the same rate as dividends, at least qualified dividends, just timing differs:

Simple case with a corporation worth $200 with two equal shareholders, who each paid $100 for their half of the company and are in 20% capital gains tax bracket, ignoring net investment tax of 3.8%:

Dividends:

Corporation pays $100 in qualified dividends, $50 to each shareholder. Each shareholder pays their capital gains tax rate on the $50. If that rate is 20% for each, then a total of $20 is collected by the US Treasury. Each shareholder then reinvests or spends the remaining $80 in the economy, while the government puts the $20 to work.

Buy Back Case:

Corporation buys back $100 of shares from 1 shareholder. No taxes were due there as there were no capital gains for shareholder 1. Shareholder 2 now owns 100% of the corporation, so their investment is now, all other thing equal, worth $200. When shareholder 2 sells, a bill for $20 is due ( $100 in capital gains x capital gains rate ). Shareholder 1 reinvests/spends $100 in economy, government gets no additional cash now, but will eventually when Shareholder 2 sells.

In the end, government gets the same $20 in tax. Benefits of the buy back are that investors are able to choose whether or not they want to cash out, whereas a dividend forces it on all investors. Downside is that government has to wait for the $20 in capital gains taxes. However, if shareholder 1 owed capital gains on the buy back ( perhaps they bought their share for $50, so would owe $10 in the $50 it made on the sale ), the government would get $10 from that sale + $20 down the road when shareholder 2 sold.

I have never heard of extinction as a possible consequence of climate change. Care to elaborate how that might be possible? Even if society crumbles due to unrest, the Earth will be inhabitable in at least some areas. It's hard to imagine that every single human being on Earth will die.

Why not just fix inheritance issues?

At the time of death, either make the estate pay capital gains taxes on the market value of the assets, or just don't give the heirs a stepped-up basis. It will catch up eventually.

Five facts, and one generally-held assumption:

Fact 1. Companies’ brains (for this level of executive decision-making) are their boards of directors.

Fact 2. Boards of directors are made up of people elected by shareholders.

Fact 3. “Making the shareholders money” (either through dividends or equity) is the most obvious “platform” on which to get elected to this position; and “not making the shareholders money” is usually a quick way to get replaced.

Fact 4. Unlike government elections in America—but like elections in Commonwealth nations—corporate “snap elections” can be triggered at any time from a shareholder vote. This means that a board-member can be removed pretty much instantly if they start to look like they’re not serving the shareholders’ interests.

Fact 5. Members of the board usually want to stay on the board, because it confers advantages. Even if there are no explicit advantages to being on the board, they get the ability to vote in ways that work toward their own personal interests, perhaps even getting themselves sweetheart deals. Even if they don’t go for these, there might be “lobbyists” (internal to the company, from industry-organizational bodies, etc.) that are willing to bribe them to vote certain ways.

And now, the assumption, that tends to hold in cases of publicly-traded companies: shareholders in the company are, by majority, pure investors that want their share value to increase, with some making short-term plays and others going long, but neither all that interested in the company outside of its portfolio value.

Putting the facts and the assumption together, you can derive that the board is structured in such a way, and members of the board are incentivized in such a way, that their behaviour is extremely predictable, operating almost according to an algorithm, rather than acting like a “group of people” with human whims.

This emergent behavior of the group, and the clear algorithmic model that can be used to predict it, are what people mean when they talk about “what corporations want.”

It’s very similar to how a person can want things that are at odds with the “wants” of the cells that compose them (such as doing things like drinking that damage those cells, despite each cell embodying an algorithm that steers toward that cell’s own survival.)

That’s the problem though.

Equity is an entirely imaginary value store. What’s the point of the majority holding all the corporate equity when it goes poof constantly?

80% of last generations Fortune 500s are gone. Retirees and the public were left holding the bag.

Meanwhile, the aristocracy retains generational control of all real assets.

This is another emotional boondoggle, wrapped in numbers to provide some sort of concretized framework. It’s the same old scam:

Load the public up on ownership/stewardship of ephemeral nonsense (previously religion) insulate the most pious/rich.

The bottom will fall out on the value of the equity, they can buy up more of the real property cheap. Rinse. Repeat.