From Sabrina Escobar's "A Stock Buyback Tax Is Added to the Inflation Bill. What That Means for Apple, Meta, and Microsoft." posted Friday on Barron's:
Democratic party leaders struck a deal with moderate holdout vote Sen. Kyrsten Sinema, moving their climate and healthcare bill one step closer to fruition. The agreement, however, could spur key changes in corporate taxation, especially on stock buybacks...
Democrats may agree to scale back elements of a proposed 15% minimum tax on large companies, according to reports. They may also remove a provision that would close the carried interest loophole, which allows private-equity partners to pay the lower capital-gains tax rate on income rather than ordinary income-tax rates.
To compensate, Democrats may add a 1% excise tax on stock buybacks for publicly traded companies, The Wall Street Journal reported, citing a person familiar with the matter. The tax on buybacks “means exactly that: a 1% salami slice taken off the top of stock buyback transactions,” wrote Capital Alpha Partners analyst James Lucier...
Over the last four quarters, Apple has spent more than $86 billion buying back shares, making it No. 1 in spending on buybacks, according to Dow Jones Market Data...
This isn’t the first time Democrats weighed adding a tax on stock buybacks. The provision was a central one of the Build Back Better act, the party’s trillion-dollar social spending initiative that fizzled out in November after party leadership failed to come to a compromise with moderate Sen. Joe Manchin of West Virginia. At the time, the administration estimated that a 1% repurchase tax could generate about $125 billion in revenue over 10 years. For comparison, the carried interest loophole would have raised $14 billion in taxes. A buyback tax could also incentivize companies to shift to dividend payouts. Studies estimate that a 1% tax rate on share repurchases could induce about a 1.5% increase in dividend payouts, wrote Tax Policy Center senior fellow Thornton Matheson.
My take: Let's see... 1% of $86 billion is $860 million, which Apple can probably afford. Sinema has been holding out for the carried interest loophole -- a gift to hedge fund managers -- from the start.
The opponents of buybacks claim that, if we can stop these evil deeds, the companies will use the money to pay higher wages, “invest”, etc. Deterrents to buybacks will do none of those things.
Why?
Without federal deficit spending the US economy would come to a standstill. That makes the government a partner to those making profits, especially those making more than $300,000/year.
PARTNERS GET HALF.
What’s really disgusting, in my view, is that the government borrows from those extreme profit makers in order to fund that deficit spending. So in addition to making oversized profit as a result of deficit spending, those making more than $300,000 earn interest, paid by the government, to make deficit spending possible.
The majority of the US tax code is written give high income earners tax breaks not available to lower income groups.
Seems way OT, but I’ll bite:
First and foremost, whatever tax system is in place has to be adjusted for inflation. That was the basic problem with the old graduated tax: Inflation inevitably drove folks into higher and higher tax brackets. Congress-critters liked it, because they never had to vote for a tax hike – inflation made it happen automatically.
But a flat tax? Completely non-equitable. A graduated tax that’s tied to inflation is more fair.
I think of it as citizens in a big lake; some in yachts, some in rowboats, some swimming, some barely keeping their heads above water, and, yes, some drowning. A flat tax puts the same relative weight on everyone, but a distributed/graduated tax puts more relative weight on those that can best handle it. Result: Nobody drowns, and everyone has a chance to get out of the water.
Guess who doesn’t like this approach? If you guessed “the wealthy”, go to the head of the class.
This plan is not a flat tax.
Income $300,000 = 0.0% effective tax rate. Net income $300,000 per year
Income $400,000 = 12.5% effective tax rate. Net income $350,000 per year
Income $500,000 = 20.0% effective tax rate. Net income $400,000 per year
Income $1,000,000 = 35.0% effective tax rate. Net income $750,000 per year
Income $2,000,000 = 42.5% effective tax rate. Net income $1,250,000 per year
Tax returns could be filed on a postcard.