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Planet money podcast said we did about $7 trillion in stock buy backs over the last 10 years [0]. That is $700 billion a year, so a 5% tax is $35 billion a yea

Planet money podcast said we did about $7 trillion in stock buy backs over the last 10 years [0]. That is $700 billion a year, so a 5% tax is $35 billion a year. It’s a lot of money, but not enough for fundamental change. It would of been enough collectively to pay for the stimulus we are doing now though. 0 - https://www.marketwatch.com/story/sp-500-companies-spent-7-trillion-on-buybacks-and-dividends-and-been-rewarded-by-coronavirus-bailouts-says-social-capital-ceo-2020-04-22 https://www.marketwatch.com/story/sp-500-companies-spent-7-t...

JamesBarney 6y ago
My understanding is that we are spending over 2 trillion in stimulus, it doesn't seem like 35 billion or even 700 billion will come close to paying for that.
nugget 6y ago
Didn't the Fed recently create a couple trillion dollars to inject into the economy? I'm not sure why you'd need additional taxes at all, when it seems that deflationary pressure is so great that you can summon up trillions with little inflationary consequence. $35 billion/year seems like nothing compared to this.
- sixo 6y ago
  Those were loans, paid back almost immediately.
- chumali 6y ago
  If you are referring to the Fed repo market operations, then these are short-term collateralised loans, so not really the same thing as pumping trillions in to the real economy. A fiscal stimulus of that size would almost certainly drive demand (during a pandemic that has caused a negative supply shock) and therefore increase inflation.
  - nugget 6y ago
    At a minimum doesn't the CARES act transfer at least $500 billion to SMBs and unemployed people, via PPP and Federal supplemental UI? And since this is all deficit spending, it's implicitly backed up by the Fed being willing to purchase Treasury issuances? My point being that if you buy into MMT and you don't think what has happened in the last couple months has created any inflationary pressure then you probably believe you can spend another trillion with little risk.
andrewljohnson 6y ago
Does not compute. If congress passed a stock buyback tax 10 years ago, there would have been less buybacks over the 10 years.
- mrep 6y ago
  Not just less, there would be none and it would have all been given out as dividends. Stock buybacks are just dividends reinvested in the company for you.
  - eli_gottlieb 6y ago
    Then how about the company doesn't make that investment decision for me?
    - deleted 6y ago
      [deleted]
    - mrep 6y ago
      You can sell a proportion of you holdings to maintain the same ownership percentage thus acting like a dividend if you want. With fractional shares, you should be able to even do it with a small amount of shares. Albeit, I don't know of any brokerage that automates it for you. You can also just buy ETFs as they will sell stocks themselves in order to maintain proper weightings.
    - frockington1 6y ago
      Then sell proportionately to the buyback, you'll probably even make some money to get taxed on
  - mikestew 6y ago
    Dividends would have been taxed. “Stock buy-backs are just...” leaves a lot out, enough that one might wonder if it were intentional.
    - mrep 6y ago
cdash 6y ago
Really? You think it will pay for the 2+ trillion existing stimulus? That is not to mention the stimulus that just got passed in the house, another 3 trillion. It probably wont actually be enacted to law but 35 billion is peanuts when you are talking about these numbers.
this_user 6y ago
Except if you taxed those buybacks, they wouldn't be happening, or would only be happening at a much smaller volume. BBs are a way for companies to return money to investors when they don't know what else to do with their cash. This is how capitalism is supposed to work by optimising the allocation of capital. What you want to do is create an artificial incentive for not returning the capital, which will lead to its suboptimal allocation. Companies will either sit on their cash, or they will be putting it into projects they would otherwise not be doing.
- mikestew 6y ago
  BBs are a way for companies to return money to investors when they don't know what else to do with their cash. That’s called a “dividend”. A dividend is taxed, however. I’ll leave the rest as an exercise for the reader. What you want to do is create an artificial incentive for not returning the capital, which will lead to its suboptimal allocation. I truly don’t know what to make of this comment. On the one hand, we are all being mansplained on how stock buy-backs works, yet not one mention of the word “dividend”.
  - fennecfoxen 6y ago
    > A dividend is taxed, however. You know what else is taxed? When a company buys back stock, reducing the number of shares outstanding so that each share represents more of the ongoing business, thus sending its stock price higher. The tax on this is called a "capital gains tax," perhaps you've heard of it?

JamesBarney 6y ago

My understanding is that we are spending over 2 trillion in stimulus, it doesn't seem like 35 billion or even 700 billion will come close to paying for that.

nugget 6y ago

Didn't the Fed recently create a couple trillion dollars to inject into the economy? I'm not sure why you'd need additional taxes at all, when it seems that deflationary pressure is so great that you can summon up trillions with little inflationary consequence. $35 billion/year seems like nothing compared to this.

sixo 6y ago
Those were loans, paid back almost immediately.
chumali 6y ago
If you are referring to the Fed repo market operations, then these are short-term collateralised loans, so not really the same thing as pumping trillions in to the real economy. A fiscal stimulus of that size would almost certainly drive demand (during a pandemic that has caused a negative supply shock) and therefore increase inflation.
- nugget 6y ago
  At a minimum doesn't the CARES act transfer at least $500 billion to SMBs and unemployed people, via PPP and Federal supplemental UI? And since this is all deficit spending, it's implicitly backed up by the Fed being willing to purchase Treasury issuances? My point being that if you buy into MMT and you don't think what has happened in the last couple months has created any inflationary pressure then you probably believe you can spend another trillion with little risk.

andrewljohnson 6y ago

Does not compute. If congress passed a stock buyback tax 10 years ago, there would have been less buybacks over the 10 years.

mrep 6y ago
Not just less, there would be none and it would have all been given out as dividends. Stock buybacks are just dividends reinvested in the company for you.
- eli_gottlieb 6y ago
  Then how about the company doesn't make that investment decision for me?
  - deleted 6y ago
    [deleted]
  - mrep 6y ago
    You can sell a proportion of you holdings to maintain the same ownership percentage thus acting like a dividend if you want. With fractional shares, you should be able to even do it with a small amount of shares. Albeit, I don't know of any brokerage that automates it for you. You can also just buy ETFs as they will sell stocks themselves in order to maintain proper weightings.
  - frockington1 6y ago
    Then sell proportionately to the buyback, you'll probably even make some money to get taxed on
- mikestew 6y ago
  Dividends would have been taxed. “Stock buy-backs are just...” leaves a lot out, enough that one might wonder if it were intentional.
  - mrep 6y ago

cdash 6y ago

Really? You think it will pay for the 2+ trillion existing stimulus? That is not to mention the stimulus that just got passed in the house, another 3 trillion. It probably wont actually be enacted to law but 35 billion is peanuts when you are talking about these numbers.

this_user 6y ago

Except if you taxed those buybacks, they wouldn't be happening, or would only be happening at a much smaller volume. BBs are a way for companies to return money to investors when they don't know what else to do with their cash. This is how capitalism is supposed to work by optimising the allocation of capital. What you want to do is create an artificial incentive for not returning the capital, which will lead to its suboptimal allocation. Companies will either sit on their cash, or they will be putting it into projects they would otherwise not be doing.

mikestew 6y ago
BBs are a way for companies to return money to investors when they don't know what else to do with their cash. That’s called a “dividend”. A dividend is taxed, however. I’ll leave the rest as an exercise for the reader. What you want to do is create an artificial incentive for not returning the capital, which will lead to its suboptimal allocation. I truly don’t know what to make of this comment. On the one hand, we are all being mansplained on how stock buy-backs works, yet not one mention of the word “dividend”.
- fennecfoxen 6y ago
  > A dividend is taxed, however. You know what else is taxed? When a company buys back stock, reducing the number of shares outstanding so that each share represents more of the ongoing business, thus sending its stock price higher. The tax on this is called a "capital gains tax," perhaps you've heard of it?