Florida Sen. Marco Rubio (R-Fla.) laid out his case for a crackdown on corporate share buybacks on Wednesday, tweeting that he would “soon” introduce a bill that would seek to discourage the practice that has drawn the ire of top Democrats in recent weeks.
“Right now [we] don’t have a ‘free market,’” Rubio wrote. “We have [a] tax code which engineers economy in favor of inflating prices of shares at the expense of future productivity and job creation. If we are going to use tax code to incentivize behavior, it should be investing in productivity and jobs.”
Rubio’s plan would seek to eliminate differences in the way corporate buybacks and dividends are treated in the tax code. At present, share repurchases are taxed at a lower rate compared to dividends.
The tweetstorm came one day after Rubio, who chairs Congress’ Small Business Committee, signaled his support for a proposal to eliminate differences in the way share buybacks and dividends are treated. Rubio joined Sen. Chuck Schumer (D-NY) and Sen. Bernie Sanders (I-VT) in criticizing the practice.
Schumer and Sanders argued in a recent New York Times op-ed that companies should have to meet certain conditions, such as minimum benchmarks wages and paid sick time, before they can make share repurchases.
Corporate buybacks, which function as a way for companies to compensate their shareholders, have drawn increased scrutiny after U.S. firms spent more than $1 trillion on share repurchases after the passage of a sweeping tax reform package in late 2017. Championed by the Trump administration, the reforms reduced the corporate tax rate to 21 percent from 35 percent.
The Small Business Committee’s report argued that U.S. companies are increasing share buybacks even as they invest less in innovation and employee training.
“I support free market over socialism [because the] market [is] better than gov’t at encouraging investment & innovation needed for widespread prosperity,” Rubio wrote on Twitter. “But tax code discourages best aspect of free market by giving buybacks a deferral advantage over dividends or investment.”