Huge stock buybacks were never a good look for Apple

Senators Schumer and Sanders didn’t name Apple in their New York Times buyback op-ed Monday. They didn’t have to.

schumer sanders apple buybacks

My take: CNBC thinks Apple is at risk. Barron’s thinks different.

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11 Comments

  1. Jonny Tilney said:

    Most current and future pensioners globally benefit one way or another from Apple buybacks. Such mistaken desire to redistribute wealth is wrongheaded.

    2
    February 5, 2019
  2. David Emery said:

    These Senators should be HONEST and just institute a tax, because that’s what they’re calling for. They want to tell corporations how to spend money, to meet what the Senators direct as ‘valuable social objectives.’

    1
    February 5, 2019
  3. Turley Muller said:

    The whole premise behind buying stocks is receiving an ownership stake that entitles one to a share of the profits. If the government is going to keep owners from their profits, then what is the point ? Horrible idea. Sure. I understand that dissatisfaction with the 1%, but this would affect to the stock maket as a whole, in which probably half of Americans are probably invested, either directly or vis a vis pensions and 401Ks. 529s. Etc.

    3
    February 5, 2019
  4. Jonathan Mackenzie said:

    Income inequality certainly has been growing over the past few decades and it is now at or near levels not seen since the golden age of robber barons in the late 19th century. Putting moral assumptions aside, this may be a bad thing because it is not ideal for the economy. A large and growing middle class is the hallmark of a prosperous nation. A stagnant or shrinking middle class is obviously not what anyone looking at the big picture wants to see.

    But correlation is not causation. That companies have been buying back shares over the last few decades does not in any way prove that this is a primary cause of (or even related to) wealth disparity. Capital allocated in this way is generally excess capital discovered after setting levels of R&D and Cap-Ex, so the argument that buybacks somehow steal development dollars is specious. If a company thinks it can make a better return through some capital project than it could through buybacks, that’s how it would spend its money. The alternative is too many dollars chasing new speculative bets which is malinvestment. That leads to pain for workers too.

    I lean more socialist than many would assume, but if you want to require companies to pay their employees $15, the proper place for that policy is through the minimum wage. If you want to increase the taxes on dividends, then make a case and pass a law.

    Ultimately, this notion that buybacks are playing a sinister role in income inequality is not a well made case. Heck, there is even a debate about whether buybacks really increase share value at all. They are a long way from proving that employees are poorer because companies are buying back their own stock.

    2
    February 5, 2019
  5. Michael Thompson said:

    Last that I heard Schumer and Sanders were in the minority in the Senate. Any bill authored by them is DOA.

    0
    February 5, 2019
  6. Fred Stein said:

    But we want both wealth creation; and some way (tax) to address wealth disparity. But sadly the recent tax changes were lopsided, aiding both wealth creation and wealth concentration. We could have tax laws that aid wealth creation and distribution. Both political sides have to give up their ideologies to achieve that.

    1
    February 6, 2019
  7. David Emery said:

    This might be too off-topic, so PED should shut it down if so.

    What’s the collective view of the folks here on getting rid of Capital Gains taxes? The argument for this is that those tax breaks are disproportionally used by the very wealthy to pay less taxes than those who depend on earned income (which is also subject to payroll taxes for Social Security and Medicare). The argument against is that the capital tax rate encourages investment. (But it seems to me that people would invest to get better returns than savings account, even without the capital gains tax break.)

    0
    February 6, 2019
    • David Drinkwater said:

      My mom is a tax lawyer, so we talk about this stuff. Her role is to help taxpayers (that’s who she works for). Our views are generally fiscally and socially liberal. Here’s my two cents:

      “What’s the collective view of the folks here on getting rid of Capital Gains taxes?”

      You have to tax capital gains, plain and simple, but I’m pretty sure that’s not your question. Should they be taxed at a lower rate than ordinary income (i.e. have a different class of taxation for capital gains)? I really don’t know, but I lean toward no. This is by no means to my financial benefit. I’m no Warren Buffet, but I know that my aggregated tax rate is pretty low. That is in part because I give charitably, but the fact that capital gains are low doesn’t hurt at all.

      I think the government would be better served to establish the equivalent of FRAND terms for repatriation. And it should encourage investment. Not being a big business comptroller or similar, I don’t know to what degree this happens already.

      Back to individual capital gains taxation, I believe that, if the graduation of a graduated tax system is done right, it doesn’t matter whether the taxed items are ordinary income, capital gains, or anything else. But I do think that working folks (anything less than a 5%er – individual or family) should be relatively immune to or unharmed by any changes attempted. I’m basing this on Wikipedia data from 2005, but if I dug harder, I would probably end up feeling the same.

      I honestly believe that income earned from worked earnings (paychecks, tips, etc) should be taxed *lower* than capital gains are taxed. But that’s just my ultra-liberal self talking.

      0
      February 7, 2019
  8. Michael Thompson said:

    PED, according to Apple’s recently updated “Return of Capital and Net Cash Position”, the total monies spent on buybacks is now $247.3 billion.

    0
    February 6, 2019
  9. John Konopka said:

    I suppose a lot of people don’t understand share buy backs. On top of that, there probably have been companies that used buybacks as a scam. They overborrowed then used that for buybacks and let the company crash. To the casual observer this looks underhanded.

    0
    February 6, 2019

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