3 ms·
A buyback increases EPS and makes the shares worth more. Same pie, fewer slices. It is just a more tax efficient way to distribute earnings.
by Msw242 4y ago
A buyback increases EPS and makes the shares worth more. Same pie, fewer slices.
It is just a more tax efficient way to distribute earnings.
- disgruntledphd2 4y agoBuybacks should be banned. It's bad for society to have companies spend money on their own shares, and dividends have the appealing property that they allow a holder to both continue to hold, and bank some gains for further investments.
- JamesBarney 4y agoMost holders own enough stock that if they wanted to both bank some gain and hold they could sell some stock and hold on to some other stock. I think we should get rid of the tax advantage for capital gains though, the mechanism through which a company distributes capital shouldn't determine tax rate. Also I think dividends make it psychologically easier for people to live off the interest.
- Msw242 4y agoThe reason that cap gains are taxed differently is because of inflation. If you have 10000 in stock, and there's 20% inflation and the price of your stock goes up to 12000, you haven't made any real gains (no added purchasing power) but you have accrued 2000 in taxable gains. Instead of adjusting returns for inflation, we just reduced the marginal tax rate for capital gains.