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Stock buybacks are economically equivalent to paying dividends, but they’re less costly from a tax perspective. Are dividends also to be banned? If so, what is

Stock buybacks are economically equivalent to paying dividends, but they’re less costly from a tax perspective. Are dividends also to be banned? If so, what is even the purpose of a company, and who would possibly invest in a it knowing that it can’t pay any returns?

cakeface 4y ago
I suspect your question is rhetorical but I, and quite a few other Marxists, would say yes. Dividends, stock buybacks and other types of profit should be banned.
- terr-dav 4y ago
  My issue is with the concentrated control of where the surplus value goes, I see the existence of dividends & stock buybacks as more of a side-effect of the system than a core-problem.
- NotYourLawyer 4y ago
  lol
akira2501 4y ago
> Stock buybacks are economically equivalent to paying dividends Okay.. what's the chain of logic here? > but they’re less costly from a tax perspective. Sure.. but they also interfere with the "public ownership" ideal, which is the specific principle I was commenting about in the original. > Are dividends also to be banned? No.. just buybacks. I think you can still have dividends, even though there's some abstract idea that they're equivalent. > If so, what is even the purpose of a company The question is.. "what even is the purpose of public ownership." If you want to operate privately, I believe all of these questions become moot. > and who would possibly invest in a it knowing that it can’t pay any returns? The public. Which is what we want. Or, again, stay private.
- NotYourLawyer 4y ago
  Buybacks don’t interfere with public ownership. They just boost the share price. Any member of the public who wants to remain a shareholder just… doesn’t sell his shares.
triceratops 4y ago
If buybacks and dividends are the same thing, then why even allow both to exist? Just eliminate buybacks and enjoy the higher tax revenue. And maybe also accompany it with a tax cut on dividends to even things out slightly. We want companies to become more efficient and increase productivity, but we also want society to benefit from that in the form of higher tax revenue. Eliminating buybacks accomplishes both. Buybacks juice earnings per share. Stock valuation uses P/E ratio as an input. Meaning buybacks disproportionately benefit upper management, whose compensation is tied to the stock price. There's a principal agent problem here. Management may elect to do a buyback even if it's not in the company's best interest. Dividends don't have that problem.

cakeface 4y ago

I suspect your question is rhetorical but I, and quite a few other Marxists, would say yes. Dividends, stock buybacks and other types of profit should be banned.

terr-dav 4y ago
My issue is with the concentrated control of where the surplus value goes, I see the existence of dividends & stock buybacks as more of a side-effect of the system than a core-problem.
NotYourLawyer 4y ago
lol

akira2501 4y ago

> Stock buybacks are economically equivalent to paying dividends Okay.. what's the chain of logic here? > but they’re less costly from a tax perspective. Sure.. but they also interfere with the "public ownership" ideal, which is the specific principle I was commenting about in the original. > Are dividends also to be banned? No.. just buybacks. I think you can still have dividends, even though there's some abstract idea that they're equivalent. > If so, what is even the purpose of a company The question is.. "what even is the purpose of public ownership." If you want to operate privately, I believe all of these questions become moot. > and who would possibly invest in a it knowing that it can’t pay any returns? The public. Which is what we want. Or, again, stay private.

NotYourLawyer 4y ago
Buybacks don’t interfere with public ownership. They just boost the share price. Any member of the public who wants to remain a shareholder just… doesn’t sell his shares.

triceratops 4y ago

If buybacks and dividends are the same thing, then why even allow both to exist? Just eliminate buybacks and enjoy the higher tax revenue. And maybe also accompany it with a tax cut on dividends to even things out slightly. We want companies to become more efficient and increase productivity, but we also want society to benefit from that in the form of higher tax revenue. Eliminating buybacks accomplishes both. Buybacks juice earnings per share. Stock valuation uses P/E ratio as an input. Meaning buybacks disproportionately benefit upper management, whose compensation is tied to the stock price. There's a principal agent problem here. Management may elect to do a buyback even if it's not in the company's best interest. Dividends don't have that problem.