Trending Assets
Top investors this month
Trending Assets
Top investors this month
Buybacks in the Bill
Stock-Buyback Tax Revival in Senate Bill Leaves Wall Street Unfazed
A vote on the Senate Democrats' tax and climate bill is expected this weekend. Late Thursday, after negotiations to get Senator Krysten Sinema on board, a new levy was unexpectedly added.
Stock buybacks, a beloved tactic by companies & investors to boost share prices, could be facing a tax. Though analysts consider it negative, the impact on markets is not expected to be detrimental.
The proposed measure levies a 1% excise tax on the value of corporate stock buybacks, which Democrats are hoping will slow their use because they produce capital gains but no immediate tax bills. The tax would also potentially shift some companies to opt instead for dividends, which are taxed when issued.
Tina Teng, a markets analyst at CMC Markets Plc:
“To avoid the tax, companies may choose to increase dividends payout to shareholders but it will also cause a price drop and burden investors with more tax.”
Sam Stovall, chief investment strategist at CFRA:
“Investors buy stocks because they want a cut of the action. The action is corporate profits, earnings, and a way that investors will benefit from those earnings is an increase in share price or an increase in dividend payout. Share buybacks can also help with share prices. So I think what this does is sort of remove the incentive offered through share buybacks. The cut of the action would then come simply in price increases or dividend payout increases.”
Already have an account?