- The Washington Times - Wednesday, February 8, 2023

A federal tax on corporate stock buybacks has been in effect for only a month, but President Biden is already asking Congress to quadruple it in a sign the surcharge has done little to deter the practice. 

Mr. Biden urged lawmakers during his second State of the Union address to overhaul the tax code to ensure billionaires do not pay “a lower tax rate than a schoolteacher or a firefighter.” Topping the list of changes Mr. Biden wants to see is a quadrupling of the 1% surcharge on corporate stock buybacks that was instituted in January. 

“You may have noticed that Big Oil just reported record profits. Last year, they made $200 billion in the midst of a global energy crisis,” Mr. Biden said. “They invested too little of that profit to increase domestic production and keep gas prices down. Instead, they used those record profits to buy back their own stock, rewarding their CEOs and shareholders.”

He added, “That’s why I propose that we quadruple the tax on corporate stock buybacks to encourage long-term investments instead. They will still make a considerable profit.”

Last August, Mr. Biden’s $730 billion Inflation Reduction Act passed Congress. The legislation, which included new tax credits for green energy initiatives, also added a slew of taxes on corporations and the wealthy. One of those was a 1% excise tax on stock buybacks. 

Despite the tax going into effect this year, it appears to have done little to limit corporations from using the practice. 

Last month, Chevron alone announced a $75 billion stock buyback program after making a record $36 billion in profits last year. Not to be outdone, Facebook’s parent company, Meta, announced last week it would buy back $40 billion worth of its stock. 

Howard Silverblatt, a market analyst at Standard & Poor’s 500, recently said Mr. Biden’s 1% tax was too small to deter companies from pursuing stock buybacks. S&P 500 has estimated the existing surcharge will reduce corporate earnings by only 0.5%. 

Democrats say the proliferation of corporate stock buybacks is argument enough for Congress to quadruple the tax. They say the point is not to punish companies for buying back their stock, but rather to push corporations to use profits to raise wages and offer better benefits for workers. 

“We cannot allow greedy billionaires and corporations to hoard wealth while our communities suffer,” said Rep. Cori Bush, Missouri Democrat.

Still, even critics of Mr. Biden’s agenda are surprised at how quickly the White House is pushing to raise a recently created tax. 

“All taxes start small and then grow, like tapeworms. Democrats imposed this tax 37 days ago, and they are already trying to quadruple it,” said Grover Norquist, president of Americans for Tax Reform. 

Mr. Biden’s push faces long odds in the GOP-controlled House of Representatives. Republicans opposed Mr. Biden’s Inflation Reduction Act last year, especially its tax provisions. 

• Haris Alic can be reached at halic@washingtontimes.com.

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