Democrats have pulled off a quiet first in their just-passed legislation addressing climate change and health care: the creation of a tax on stock buybacks, a cherished tool of Corporate America that had long seemed untouchable.
Under the bill President Joe Biden is scheduled to sign into law Tuesday, companies will face a new 1% excise tax on purchases of their own shares, effectively paying a penalty for a maneuver that they have long used to return cash to investors and bolster their stock price. The tax takes effect in 2023.
Buybacks have ballooned in recent years — they’re forecast to reach $1 trillion in 2022 — as companies have swelled with cash from sky-high profits.
Investors, including pension and retirement funds, like the buybacks. But fiery critics of big corporations and Wall Street like Sens. Elizabeth Warren and Bernie Sanders loathe them, calling the practice “paper manipulation” to enrich senior executives and big shareholders.
Centrist Democrats, too, such as Senate Majority Leader Chuck Schumer, have long criticized buybacks.
Democrats say that…
