Tags: marco rubio | limit | stock | buybacks

Marco Rubio: Change Tax Law to Curb Stock Buybacks

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By    |   Tuesday, 12 February 2019 04:27 PM

Sen. Marco Rubio joined Democratic rivals in the objection to the corporate use of cash for stock buybacks, launching his own plan to curb the process.

The Florida Republican and former presidential candidate wants to change the way buybacks are taxed as a way to discourage companies from pursuing them. He would reduce the incentives for buybacks by eliminating the preferential tax treatment of such purchases, which would be taxed as dividends, CNBC explained.

The measure aligns Rubio with Democrats who have argued that the benefits of the GOP's tax law have primarily benefited corporations rather than households, CNBC explained.

Strategists told CNBC that Rubio's entry into the fight does not signal a bi-partisan war on the stock market in the upcoming election, but one said it's "disconcerting" and "it's one thing to have the far left suggesting some of these things, but if you start to get the right wing doing it, it's a little bit of a game changer."

Rubio is the chairman of the Small Business Committee, which released a report that argued that equal rates would remove companies' incentives to buy back stock in the first place.

"Tax policy changes to end this preference might, on their own, increase investment by shifting shareholder appetite for capital return," the report states.

Last week, two top Senate Democrats vowed to introduce legislation barring companies from buying back their own stock unless they first increase workers’ pay and benefits, as the party seeks to frame 2020 election issues by spotlighting corporate responsibility, Bloomberg reported.

Senate Minority Leader Chuck Schumer and Senator Bernie Sanders, who is considering a second run for the Democratic presidential nomination in 2020, wrote in a New York Times opinion piece last week that their plan would require companies pursuing buybacks to take such actions as raising workers’ minimum pay to $15 an hour, improving pensions or offering seven days of paid sick leave.

“When more than 80 percent of corporate profits are going to stock buybacks and dividends, something is really wrong in the state of corporate America and the state of our economy,” Schumer of New York said on the Senate floor.

Schumer and Sanders’ article pointed to recent decisions of companies including Walmart Inc. and Wells Fargo & Co. to repurchase billions of dollars in shares at about the same time they cut jobs.

The proposal would generate little support among Republicans in the GOP-controlled Senate, so it’s likely to serve more as a campaign issue than to be enacted into law.

Several of the party’s presidential hopefuls in the Senate are focusing on corporate governance as an election issue, including Senators Elizabeth Warren of Massachusetts, Kamala Harris of California and Cory Booker of New Jersey. Sanders, an independent who has a spot in Democratic Senate leadership, sought the party’s presidential nomination in 2016 and is weighing another run.

Meanwhile, Yahoo Finance cited Bank of America Merrill Lynch (BAML) as saying that corporate stock buybacks “remained strong last week and year-to-date continue to track above last year's records.” They specifically said that activity is pacing 78% above last year’s levels.

Yahoo Finance explained that 2018 was a record with U.S. companies putting more than $1 trillion toward stock buybacks

According to Bank of America Merrill Lynch (BAML), corporate stock buybacks “remained strong last week and year-to-date continue to track above last year's records.” They specifically said that activity is pacing 78% above last year’s levels.

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Sen. Marco Rubio joined Democratic rivals in the objection to the corporate use of cash for stock buybacks, launching his own plan to curb the process.
marco rubio, limit, stock, buybacks
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2019-27-12
Tuesday, 12 February 2019 04:27 PM
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