8 ms·

The point is both the companies in question and the ultra-wealthy that are the beneficiaries of the vast majority of these buybacks AREN'T paying taxes, so it's

by tw04 7y ago

The point is both the companies in question and the ultra-wealthy that are the beneficiaries of the vast majority of these buybacks AREN'T paying taxes, so it's another way for the government to at least attempt to capture the $$ that should already be going into the treasury instead of offshore accounts/subsidiaries/whatever double dutch triple lux tax evasion scheme of the month they're using.

mrep 7y ago
How are they not paying taxes? The people selling their stock to the company in the buyback have to pay taxes on any gains and the people holding onto the stock long term will eventually have to pay taxes on any gains when they finally do sell (they're not going to hold onto a stock until the heat death of the universe so they are going to realize their gains and pay taxes on them at some point).
- jf22 7y ago
  I believe your comment is referencing normal people paying taxes, where the comment you are replying too is referencing the ultra-wealthy and corporations paying taxes. The ultra-wealthy and big corporations take advantage of schemes to lower their taxes.
- tw04 7y ago
  If you have enough money, there are limitless ways to avoid paying taxes that range from illegal to legal but extremely questionable. https://en.m.wikipedia.org/wiki/Panama_Papers https://en.m.wikipedia.org/wiki/Panama_Papers
- pwinnski 7y ago
  That's a great question with a complicated answer. Here's a start: https://www.theatlantic.com/politics/archive/2018/12/rich-people-are-getting-away-not-paying-their-taxes/577798/ https://www.theatlantic.com/politics/archive/2018/12/rich-pe...
- xt00 7y ago
  The companies are in many cases doing things like this: 1) their revenue they classify is centered in a different country like Ireland 2) they setup a massive line of credit with an international bank 3) they take out massive loans against the money they have “overseas” that is not taxed 4) they then pay the buybacks and other things to their investors with that loaned money in US 5) they then pay back the bank at their international site 6) the bank then borrows more money from federal reserve at nearly zero interest rate Rinse and repeat.. tons of companies have done this. So sure some investors will eventually cash out but companies should also be taxed if they derive some benefit from the country they are from or selling products. I would argue those taxes should be low but allowing companies to totally dodge them seems like a bad setup long term.
  - ivalm 7y ago
    Sure, when a company BUYS stock someone SELLS it to then. The selling party incurs capital gains and pays taxes on it.
  - refurb 7y ago
    OK, but that has nothing to do with whether or not the people selling their stock back pay taxes on it.
    - xt00 7y ago
      Wouldn't it be hilarious if the bank prior to the buyback bought a bunch of the stock (I don't know if this is true, but seems plausible). Then in that case the company would literally be taking out a loan from the bank in order to buy the stock from the bank. So then the question is if its possible for the bank to claim some sort of thing where when they sell the stock to the actual company that it is some special type of transaction and maybe gets favorable tax treatment? Wow I want to look into that.. sounds interesting / shady if thats possible to do..
  - bsanr2 7y ago
    What I don't understand about this is... Why can't I partake? If my employer is based out of these havens for tax purposes, why can't they pay "me" by paying into the bank account of the foreign on-paper-only company I own, whose line of credit with a foreign bank I then use for my own expenses? I feel like this must be against the law somehow, but I don't quite understand where the line is.
- CuriouslyC 7y ago
  You can borrow against the stock, and defer gains basically forever as long as it appreciates more quickly than the interest rate of your loan.
vasco 7y ago
The beneficiaries of these buybacks are the general public, these are public companies. They are your pension funds, your rainy day funds, they are government healthcare programs, Norway's Oil fund... They are everyone. The reason they aren't paying taxes on buybacks is because they haven't actually made any money until someone sells stock.
crazygringo 7y ago
The largest beneficiary of buybacks isn't the ultra-wealthy. It's retirees. It's grandma: "Of the $22.8 trillion in stock outstanding... retirement accounts owned roughly 37%, the most of any type of holder." [1] [1] https://www.businessinsider.com/who-actually-owns-the-stock-market-2016-5 https://www.businessinsider.com/who-actually-owns-the-stock-...
- cpwright 7y ago
  Retirees are also going to be selling down their portfolio as they age for living expenses. The ultra-wealthy are probably not systemically selling out of the equity market.
- take_a_breath 7y ago
  Your data does not say what you are claiming it says. It is possible (or even probable) for the ultra-wealthy to have retirement accounts. Once we admit that, then the obvious question becomes: Who do you think owns most of the money in those retirement accounts, the rich or the poor?
  - crazygringo 7y ago
    By definition not the rich, since retirement accounts are capped by law to relatively low yearly contributions. Sure the ultra-wealthy can have their retirement accounts too (if they even bother), but they can't be any larger than anyone else's. Just a tiny tiny tiny sliver for them, really.
    - take_a_breath 7y ago
      Unless there might be loopholes in those annual caps that the wealthy use to their tax advantage. Found one: ==The GAO report shows that the top 1% have saved $1 trillion in their IRAs, 22% of the total.== https://www.marketwatch.com/story/how-to-shelter-hundreds-of-millions-in-an-ira-account-2014-09-19 https://www.marketwatch.com/story/how-to-shelter-hundreds-of...
  - hippich 7y ago
rayiner 7y ago
Corporations are paying taxes. US corporate tax receipts as a percentage of GDP are a tick higher than the OECD average. Also, it’s not the “ultra wealthy” primarily benefitting from these buybacks. Most corporate equity is owned by the bottom 99% and pension funds.[1] (Someone with a $5 million retirement account may be very comfortable, but they’re not hiding their money in offshore accounts.) [1] Most corporate equities are held by retirement plans or foreigners. Just 25% are held in taxable account. Of those, the bulk is owned by people outside the top 0.1%.
- bsanr2 7y ago
  What's the rate of pension funds that have actually paid out their initial promise? How many have ceased to exist?
- jeiei0ndjd 7y ago
  That’s the problem though. Equity is an entirely imaginary value store. What’s the point of the majority holding all the corporate equity when it goes poof constantly? 80% of last generations Fortune 500s are gone. Retirees and the public were left holding the bag. Meanwhile, the aristocracy retains generational control of all real assets. This is another emotional boondoggle, wrapped in numbers to provide some sort of concretized framework. It’s the same old scam: Load the public up on ownership/stewardship of ephemeral nonsense (previously religion) insulate the most pious/rich. The bottom will fall out on the value of the equity, they can buy up more of the real property cheap. Rinse. Repeat.
  - JackFr 7y ago
    Nonsense from a throwaway account. Sign your name if you really feel that way.
  - mpalczewski 7y ago
    >> Equity is an entirely imaginary value store. So is money. >> 80% of last generations Fortune 500s are gone. Good it's called capitalism. We need creative destruction to move forward. >> Retirees and the public were left holding the bag. This! Largely because the finance industry(or perhaps the world) is run by sales people. Don't be a sucker, if you don't understand your financial assets in detail(e.g. if you are buying an index fund, understand why, not just based on past performance, go deep, what's the weighting?(currently float weighted which makes it easiest to sell to you, but the worst possible weighting makes it buy high and sell low). Fuck that's a shit fuck ton of work for just a surface level analysis. But you should do much more research into your mutual funds/stocks than you do your next car purchase. So yeah, it's not that they were left holding the bag, it's that they were sold free money that turned out to be not so free. Imagine that.
JackFr 7y ago
> the ultra-wealthy that are the beneficiaries of the vast majority of these buybacks The S&P 500 is > 80% owned by institutions. That is mutual funds, pension funds and insurance companies. The main beneficiaries arent fat cats, but rather anyone with a 401k.
- streb-lo 7y ago
  Are you claiming that a mutual funds' performance evenly benefits anyone with a 401k? In the last 40 years 0.00025% of Americans have tripled their share of the wealth. Of course everyone with a 401k has benefited but they are nowhere close to the main beneficiaries of capital gains.
  - JackFr 7y ago
    No. The share of wealth of the top 0.00025% has tripled. The pool of people people in that quantile is dynamic. In 1980, that was about 600 people. In 1980 the richest person in the United States was J. Paul Getty. I imagine most of those people are no longer alive. In 1980, Jeff Bezos was 15, Bill Gates was 24, Larry and Sergey were 6, and Sergey had been living in the United States for 1 year. It's likely that the effect you're seeing is an artifact of the role technology plays in the economy rather than exploitation or rent seeking.
s_r_n 7y ago
To add to this, the ultra-wealthy, university funds, funds-of-funds, etc. are interested in capital preservation, according to the article. This means they likely will not reinvest their profits into companies that will grow; they're more likely to reinvest into other companies that will do buybacks.

by tw04 7y ago

mrep 7y ago

How are they not paying taxes? The people selling their stock to the company in the buyback have to pay taxes on any gains and the people holding onto the stock long term will eventually have to pay taxes on any gains when they finally do sell (they're not going to hold onto a stock until the heat death of the universe so they are going to realize their gains and pay taxes on them at some point).

jf22 7y ago
I believe your comment is referencing normal people paying taxes, where the comment you are replying too is referencing the ultra-wealthy and corporations paying taxes. The ultra-wealthy and big corporations take advantage of schemes to lower their taxes.
tw04 7y ago
If you have enough money, there are limitless ways to avoid paying taxes that range from illegal to legal but extremely questionable. https://en.m.wikipedia.org/wiki/Panama_Papers https://en.m.wikipedia.org/wiki/Panama_Papers
pwinnski 7y ago
That's a great question with a complicated answer. Here's a start: https://www.theatlantic.com/politics/archive/2018/12/rich-people-are-getting-away-not-paying-their-taxes/577798/ https://www.theatlantic.com/politics/archive/2018/12/rich-pe...
xt00 7y ago
The companies are in many cases doing things like this: 1) their revenue they classify is centered in a different country like Ireland 2) they setup a massive line of credit with an international bank 3) they take out massive loans against the money they have “overseas” that is not taxed 4) they then pay the buybacks and other things to their investors with that loaned money in US 5) they then pay back the bank at their international site 6) the bank then borrows more money from federal reserve at nearly zero interest rate Rinse and repeat.. tons of companies have done this. So sure some investors will eventually cash out but companies should also be taxed if they derive some benefit from the country they are from or selling products. I would argue those taxes should be low but allowing companies to totally dodge them seems like a bad setup long term.
- ivalm 7y ago
  Sure, when a company BUYS stock someone SELLS it to then. The selling party incurs capital gains and pays taxes on it.
- refurb 7y ago
  OK, but that has nothing to do with whether or not the people selling their stock back pay taxes on it.
  - xt00 7y ago
    Wouldn't it be hilarious if the bank prior to the buyback bought a bunch of the stock (I don't know if this is true, but seems plausible). Then in that case the company would literally be taking out a loan from the bank in order to buy the stock from the bank. So then the question is if its possible for the bank to claim some sort of thing where when they sell the stock to the actual company that it is some special type of transaction and maybe gets favorable tax treatment? Wow I want to look into that.. sounds interesting / shady if thats possible to do..
- bsanr2 7y ago
  What I don't understand about this is... Why can't I partake? If my employer is based out of these havens for tax purposes, why can't they pay "me" by paying into the bank account of the foreign on-paper-only company I own, whose line of credit with a foreign bank I then use for my own expenses? I feel like this must be against the law somehow, but I don't quite understand where the line is.
CuriouslyC 7y ago
You can borrow against the stock, and defer gains basically forever as long as it appreciates more quickly than the interest rate of your loan.

vasco 7y ago

The beneficiaries of these buybacks are the general public, these are public companies. They are your pension funds, your rainy day funds, they are government healthcare programs, Norway's Oil fund... They are everyone. The reason they aren't paying taxes on buybacks is because they haven't actually made any money until someone sells stock.

crazygringo 7y ago

The largest beneficiary of buybacks isn't the ultra-wealthy. It's retirees. It's grandma: "Of the $22.8 trillion in stock outstanding... retirement accounts owned roughly 37%, the most of any type of holder." [1] [1] https://www.businessinsider.com/who-actually-owns-the-stock-market-2016-5 https://www.businessinsider.com/who-actually-owns-the-stock-...

cpwright 7y ago
Retirees are also going to be selling down their portfolio as they age for living expenses. The ultra-wealthy are probably not systemically selling out of the equity market.
take_a_breath 7y ago
Your data does not say what you are claiming it says. It is possible (or even probable) for the ultra-wealthy to have retirement accounts. Once we admit that, then the obvious question becomes: Who do you think owns most of the money in those retirement accounts, the rich or the poor?
- crazygringo 7y ago
  By definition not the rich, since retirement accounts are capped by law to relatively low yearly contributions. Sure the ultra-wealthy can have their retirement accounts too (if they even bother), but they can't be any larger than anyone else's. Just a tiny tiny tiny sliver for them, really.
  - take_a_breath 7y ago
    Unless there might be loopholes in those annual caps that the wealthy use to their tax advantage. Found one: ==The GAO report shows that the top 1% have saved $1 trillion in their IRAs, 22% of the total.== https://www.marketwatch.com/story/how-to-shelter-hundreds-of-millions-in-an-ira-account-2014-09-19 https://www.marketwatch.com/story/how-to-shelter-hundreds-of...
- hippich 7y ago

rayiner 7y ago

Corporations are paying taxes. US corporate tax receipts as a percentage of GDP are a tick higher than the OECD average. Also, it’s not the “ultra wealthy” primarily benefitting from these buybacks. Most corporate equity is owned by the bottom 99% and pension funds.[1] (Someone with a $5 million retirement account may be very comfortable, but they’re not hiding their money in offshore accounts.) [1] Most corporate equities are held by retirement plans or foreigners. Just 25% are held in taxable account. Of those, the bulk is owned by people outside the top 0.1%.

bsanr2 7y ago
What's the rate of pension funds that have actually paid out their initial promise? How many have ceased to exist?
jeiei0ndjd 7y ago
That’s the problem though. Equity is an entirely imaginary value store. What’s the point of the majority holding all the corporate equity when it goes poof constantly? 80% of last generations Fortune 500s are gone. Retirees and the public were left holding the bag. Meanwhile, the aristocracy retains generational control of all real assets. This is another emotional boondoggle, wrapped in numbers to provide some sort of concretized framework. It’s the same old scam: Load the public up on ownership/stewardship of ephemeral nonsense (previously religion) insulate the most pious/rich. The bottom will fall out on the value of the equity, they can buy up more of the real property cheap. Rinse. Repeat.
- JackFr 7y ago
  Nonsense from a throwaway account. Sign your name if you really feel that way.
- mpalczewski 7y ago
  >> Equity is an entirely imaginary value store. So is money. >> 80% of last generations Fortune 500s are gone. Good it's called capitalism. We need creative destruction to move forward. >> Retirees and the public were left holding the bag. This! Largely because the finance industry(or perhaps the world) is run by sales people. Don't be a sucker, if you don't understand your financial assets in detail(e.g. if you are buying an index fund, understand why, not just based on past performance, go deep, what's the weighting?(currently float weighted which makes it easiest to sell to you, but the worst possible weighting makes it buy high and sell low). Fuck that's a shit fuck ton of work for just a surface level analysis. But you should do much more research into your mutual funds/stocks than you do your next car purchase. So yeah, it's not that they were left holding the bag, it's that they were sold free money that turned out to be not so free. Imagine that.

JackFr 7y ago

> the ultra-wealthy that are the beneficiaries of the vast majority of these buybacks The S&P 500 is > 80% owned by institutions. That is mutual funds, pension funds and insurance companies. The main beneficiaries arent fat cats, but rather anyone with a 401k.

streb-lo 7y ago
Are you claiming that a mutual funds' performance evenly benefits anyone with a 401k? In the last 40 years 0.00025% of Americans have tripled their share of the wealth. Of course everyone with a 401k has benefited but they are nowhere close to the main beneficiaries of capital gains.
- JackFr 7y ago
  No. The share of wealth of the top 0.00025% has tripled. The pool of people people in that quantile is dynamic. In 1980, that was about 600 people. In 1980 the richest person in the United States was J. Paul Getty. I imagine most of those people are no longer alive. In 1980, Jeff Bezos was 15, Bill Gates was 24, Larry and Sergey were 6, and Sergey had been living in the United States for 1 year. It's likely that the effect you're seeing is an artifact of the role technology plays in the economy rather than exploitation or rent seeking.

s_r_n 7y ago

To add to this, the ultra-wealthy, university funds, funds-of-funds, etc. are interested in capital preservation, according to the article. This means they likely will not reinvest their profits into companies that will grow; they're more likely to reinvest into other companies that will do buybacks.