Democrats have pulled off a quiet first in their just-passed legislation addressing climate change and health care: the creation of a tax on stock buybacks, a cherished tool of Corporate America that had long seemed untouchable.
Under the bill President Joe Biden is scheduled to sign into law Tuesday, companies will face a new 1% excise tax on purchases of their own shares, effectively paying a penalty for a maneuver that they have long used to return cash to investors and bolster their stock price. The tax takes effect in 2023.
Buybacks have ballooned in recent years — they’re forecast to reach $1 trillion in 2022 — as companies have swelled with cash from sky-high profits.
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