Stock buybacks the latest bipartisan punching bag in Congress
Rep. Alexandria Ocasio-Cortez, D-N.Y., became the latest legislator to criticize stock buybacks on Wednesday, joining a growing number of Congress members in slamming the practice of corporations buying back their own stock from investors.
“And that would effectively increase the stock price, right? And I’ve done nothing to change my company, right? Nothing to make my product more valuable, my employees happier, I haven’t invested in training for the workforce to make the company inherently more valuable, but I’ve inflated the stock price,” she said during a House Financial Services Committee hearing on Wednesday. “How is this different than a pyramid scheme?”
Stock buybacks have increasingly drawn the ire of both Republicans and Democrats on Capitol Hill, particularly after major U.S. companies laid off employees in 2018, only to use their savings from the 2017 Tax Cuts and Jobs Act to make share repurchases worth more than $1 trillion.
The issue is likely to appear during 2020 elections because already in 2019, U.S. companies are on pace to buy back even more of their shares than they did last year, according to Axios. Through March 15, American companies bought $253 billion worth of their own stock, about $18 billion more than at the same period last year.
Here’s a closer look at some of the more-outspoken senators and representatives who have taken a stance against stock buybacks.
Sen. Marco Rubio: The Florida Republican endorsed a proposal in February to discourage corporations from buying back their own shares. The plan backed by Rubio encourages domestic investment by making full and immediate expensing permanent "as a way to discourage companies from pursuing share repurchases."
“Tax policy changes to end this preference might, on their own, increase investment by shifting shareholder appetite for capital return,” the report said. “To the extent structural incentives remain for capital return, an increased tax rate on repurchases might raise revenue to finance other incentives for capital investment like full expensing.
Rubio previously suggested there should be no tax advantage for a stock buyback versus other forms of capital allocation.
Sen. Bernie Sanders: The 2020 presidential hopeful and Vermont independent said in February alongside Sen. Chuck Schumer, D-N.Y., that they will push legislation to require U.S. businesses to complete a series of reforms, like raising minimum wage, providing workers more robust health care options and offering better retirement benefits, before they can buy back shares.
Sen. Chuck Schumer: The New York Democrat joined Sanders in calling for restrictions on companies’ ability to do stock buybacks.
“Americans should be outraged that these profitable corporations are laying off workers while spending billions of dollars to boost their stock’s value to further enrich the wealthy few,” the senators wrote.