4 ms·

To play devil's advocate here, how is that any different from increasing your dividends?

mcv 7y ago
My guess would be that it directly increases the value of stock options and unvested equity, which dividends don't. Dividends are good for people who currently hold shares, but not for people who have shares promised to them in the future.
bvrlt 7y ago
You pay taxes on dividends.
- mythz 7y ago
  You pay more taxes on dividends, you still pay taxes on Capital gains, just less.
  - jbverschoor 7y ago
    In the US yes, other places, that's not the case
    - sokoloff 7y ago
      In the US, qualified dividends (which is most of them) are taxed at long-term capital gains rates.
    - jbverschoor 7y ago
      Lol what idiots would downvote this... For exampe, in the Netherlands there are no capital gains tax. I think I'll delete my YC account, as it became a shit show
  - imtringued 7y ago
    In my opinion that is absolutely illogical because share prices can skyrocket even with weak fundamentals. Dividends should be taxed less because companies can't hype up their stocks to pay out a higher dividend (hype would actually decrease yields). Each dollar that is paid out as a dividend had to be earned by the company.
pianom4n 7y ago
It's exactly the same as a dividend, except the tax consequences are opt-in for shareholders. Only those who sell their shares are affected, unlike dividends which are equivalent to forcing all shareholders to sell an equal portion. Buybacks are just tax efficient dividends, and all of the hate against them is from people who don't realize this and haven't thought through the math. In the article it says this rule applies to dividends, too. So at least it's not pure pandering.
- patall 7y ago
  > Buybacks are just tax efficient dividends, and all of the hate against them is from people who don't realize this and haven't thought through the math Or from people who do exactly realize this and have though through the math. I mean, its not like there is no reason why dividends tend to be taxed ...
  - sokoloff 7y ago
    So are LTGCs from the shareholders who sold. Someone is paying the capital gains tax; it’s just not the people who stayed invested.
    - disiplus 7y ago
      well, that's not how it should work or is intended. if my monthly paycheck is 13k eur before taxes and i live of 5k easily, i cannot say, take only 5k and pay taxes on that and for the other 8k give me stocks untaxed, and i will probably pay some tax when i sell the stocks (and different rules applay).
      - sokoloff 7y ago
        This is exactly how pre-tax retirement account contributions work in the US (albeit with limits in the $15K-$56K/yr range, rather than ~$100K/yr).
- dragonwriter 7y ago
  > Buybacks are just tax efficient dividends, and all of the hate against them is from people who don't realize this and haven't thought through the math. No, a lot of it is from people who aren't too keen on capitalism or the means by which corporations return capital to the capitalist class in general, and particularly when it is “tax efficient”.

mcv 7y ago

My guess would be that it directly increases the value of stock options and unvested equity, which dividends don't. Dividends are good for people who currently hold shares, but not for people who have shares promised to them in the future.

bvrlt 7y ago

You pay taxes on dividends.

mythz 7y ago
You pay more taxes on dividends, you still pay taxes on Capital gains, just less.
- jbverschoor 7y ago
  In the US yes, other places, that's not the case
  - sokoloff 7y ago
    In the US, qualified dividends (which is most of them) are taxed at long-term capital gains rates.
  - jbverschoor 7y ago
    Lol what idiots would downvote this... For exampe, in the Netherlands there are no capital gains tax. I think I'll delete my YC account, as it became a shit show
- imtringued 7y ago
  In my opinion that is absolutely illogical because share prices can skyrocket even with weak fundamentals. Dividends should be taxed less because companies can't hype up their stocks to pay out a higher dividend (hype would actually decrease yields). Each dollar that is paid out as a dividend had to be earned by the company.

pianom4n 7y ago

It's exactly the same as a dividend, except the tax consequences are opt-in for shareholders. Only those who sell their shares are affected, unlike dividends which are equivalent to forcing all shareholders to sell an equal portion. Buybacks are just tax efficient dividends, and all of the hate against them is from people who don't realize this and haven't thought through the math. In the article it says this rule applies to dividends, too. So at least it's not pure pandering.

patall 7y ago
> Buybacks are just tax efficient dividends, and all of the hate against them is from people who don't realize this and haven't thought through the math Or from people who do exactly realize this and have though through the math. I mean, its not like there is no reason why dividends tend to be taxed ...
- sokoloff 7y ago
  So are LTGCs from the shareholders who sold. Someone is paying the capital gains tax; it’s just not the people who stayed invested.
  - disiplus 7y ago
    well, that's not how it should work or is intended. if my monthly paycheck is 13k eur before taxes and i live of 5k easily, i cannot say, take only 5k and pay taxes on that and for the other 8k give me stocks untaxed, and i will probably pay some tax when i sell the stocks (and different rules applay).
    - sokoloff 7y ago
      This is exactly how pre-tax retirement account contributions work in the US (albeit with limits in the $15K-$56K/yr range, rather than ~$100K/yr).
dragonwriter 7y ago
> Buybacks are just tax efficient dividends, and all of the hate against them is from people who don't realize this and haven't thought through the math. No, a lot of it is from people who aren't too keen on capitalism or the means by which corporations return capital to the capitalist class in general, and particularly when it is “tax efficient”.