Just as stock buyback activity heats up as some executives look for easy ways to boost falling stock prices, President Joe Biden is pushing back.
“Corporations should be doing the right thing,” Biden said in Tuesday night’s State of the Union address. “That’s why I propose quadrupling the tax on corporate stock buybacks and encouraging long-term investment. They’ll still make sizable profits.”
Companies have returned to aggressively buying back shares after taking a break in late 2022 with markets under significant pressure. Stock buybacks have the effect of reducing the shares outstanding, thus often increasing net profits, which is the lifeblood of stock prices.
The firms have unveiled a staggering $173.5 billion in planned buybacks so far in 2023. That’s more than double the pace seen this time last year, according to the latest data from EPFR TrimTabs.
The big buyback announcements this year have come from a who’s who of corporate titans full of cash and visions for a higher stock price.
Meta, which is dealing with falling profits due to a weak advertising market, increased its repurchase authorization to $40 billion after buying about $28 billion of shares last year.
Oil beasts Chevron and Exxon — both frequent targets of Democrats — announced new $75 billion and $35 billion buyback plans, respectively. Chevron and Exxon each spent about $15 billion to buy back their shares in 2022.
And on Tuesday, social media giant Pinterest announced a new $500 million share repurchase authorization (more on the video above).
Despite POTUS’s push, most professionals agree a buyback tax is unlikely to pass any time soon.
“That won’t happen, but it shows that the administration is optimistic about this particular policy tool when it comes to future revenue debates, and it also indicates that populist rhetoric about corporate profits will persist,” said Tobin Marcus, political strategist at EvercoreISI. in a note to the customer.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and go LinkedIn.
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