Why stock buybacks should be taxed more (with Cory Booker)

Pitchfork Economics with Nick Hanauer

Civic Ventures

Business, Government, News, Politics

4.8 • 1.5K Ratings

🗓️ 21 February 2023

⏱️ 33 minutes

🔗️ Recording | iTunes | RSS

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Summary

Stock buybacks are one of the worst excesses of modern capitalism, which naturally means they're one of our favorite subjects to cover on the podcast. And since they’re in the news again, we thought it would be a good time to revisit one of our first episodes, from 2019. How much has changed over the past 4 years? President Biden’s proposal to raise taxes on buybacks to 4% is the most promising update so far, but much of our conversation with Senator Cory Booker remains relevant today. This episode originally aired on February 26, 2019. Cory Booker is the U.S. Senator from New Jersey. Since 2013, Cory has written and championed dozens of bills aimed at fixing our broken criminal justice system, expanding economic opportunity, and fighting for equal justice for everyone. Twitter: @CoryBooker The Transformation at the Heart of Biden’s Middle-Out Economic Agenda https://prospect.org/economy/2023-02-09-biden-middle-out-agenda Stock buybacks are soaring to record levels — and Cory Booker wants to stop it https://www.vox.com/policy-and-politics/2018/3/6/17083398/booker-buyback-populist Stock Buybacks Are Killing the American Economy https://www.theatlantic.com/politics/archive/2015/02/kill-stock-buyback-to-save-the-american-economy/385259 Website: http://pitchforkeconomics.com Twitter: @PitchforkEcon Instagram: @pitchforkeconomics Nick’s twitter: @NickHanauer

Transcript

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0:00.0	If you are the CEO of a large corporation, most of your multi-million dollar compensation is tied
0:06.5	to the price of your stock, and stock prices are largely tied to earnings per share. Of course,
0:14.0	there are two ways to increase earnings per share, the hard way and the easy way. The hard way
0:20.0	is to increase your earnings, which requires hard work, imagination and risk. The easy way is to
0:27.5	reduce the number of shares by buying back your own stock. And over the past few decades,
0:33.5	America CEOs have overwhelmingly chosen the easy way to the tune of about one trillion dollars
0:41.4	in stock buybacks a year. The inflation reduction act attempted to address this by imposing a
0:48.7	1% tax on stock buybacks. It didn't really work. For example, since the tax was passed
0:56.7	Chevron announced an additional $75 billion in stock buybacks and Meta announced a $40 billion
1:04.4	buyback authorization even as they were laying off thousands of employees. And so in his state
1:11.5	of the union address, President Biden decided to up the ante by proposing to increase the buyback
1:18.7	tax to 4%. That's a great start. But Nick and I think that if you want to make a real impact
1:25.5	on stock buybacks, you need to raise that tax much higher or preferably go back to the original
1:32.5	rule and make stock buybacks illegal again. Back in 2019, we talked at length with Senator
1:40.0	Quarry Booker about stock buybacks. And since they're in the news again, we thought it would be a
1:45.2	great time to re-air that episode. I hope you enjoy listening to it as much as we enjoyed making it.
1:52.7	IBM authorizes $4 billion for a stock repurchase.
1:58.5	84% of all stocks are owned by the top 10% of households. And the top 1% of households own about
2:04.8	roughly 40% of stocks. Investors are sweeping up shares in master cards today that comes after
2:10.0	the credit card company approved a $1 billion stock buyback. From the point of view of Wall Street,
2:15.6	we could literally enslave those people. And if the profits went up, that would be righteous
2:23.6	for everyone. Huntington Bank shares announcing a $1.07 billion buyback. We make moral and value
	...

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