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February 21, 2023 at 05:54 PM
The Inflation Reduction Act was signed into law in 2022. The law contained a new 1% tax that will apply to certain corporate stock buybacks. Corporations typically use a stock buyback strategy when they believe that their shares are undervalued in the marketplace.
To increase stock value, the corporation buys their own corporate shares to decrease the number of shares that are available on the public stock market. In his State of the Union address, President Joe Biden proposed quadrupling the existing stock buyback tax, so that a 4% excise tax would apply under the existing structure.
We asked two professors and authors of ALM’s Tax Facts with opposing political viewpoints to share their opinions about Biden’s most recent proposal to quadruple the newly enacted stock buyback tax.
Below is a summary of the debate that ensued between the two professors.
Their Votes:
Bloink
Byrnes
Their Reasons:
Bloink: The new 1% stock buyback tax in the Inflation Reduction Act simply does not go far enough. Major corporations have recently announced stock buyback plans valued at $40 billion and $75 billion. The 1% excise tax on these buybacks obviously is not working to discourage them, so the logical next step would be to impose a harsher penalty that the largest corporations in America would actually feel.
