Just as share buyback activity intensifies as some executives look for easy ways to push stock prices lower, President Joe Biden is backing down.
“Corporations should be doing the right thing,” Biden said in Tuesday night’s State of the Union address. “That’s why I’m proposing we quadruple the tax on corporate share buybacks and encourage long-term investments. They’ll still make sizable returns.”
Corporations have returned to aggressive share buybacks after going on hiatus at the end of 2022 with markets under considerable pressure. Share buybacks have the effect of reducing shares outstanding, often increasing net earnings, which is the lifeblood of stock prices.
Companies have disclosed a staggering $173.5 billion in planned buybacks so far in 2023. That’s more than double the pace seen around this time last year, according to the latest data from EPFR TrimTabs.
The big buyback announcements this year came from a who’s who of corporate titans flush with cash and visions of a higher share price.
Meta, which is facing falling profits due to a weak ad market, raised its buyback authorization to $40 billion after buying about $28 billion of shares last year.
Oil beasts Chevron and Exxon, both frequent targets for Democrats, have announced new buyback plans of $75 billion and $35 billion, respectively. Chevron and Exxon each spent roughly $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 that in the video above).
Despite the push from POTUS, most professionals agree that a buyback tax is unlikely to be passed any time soon.
“This won’t happen, but it shows that the Administration is bullish on this particular policy tool when it comes to future revenue debates, and it also indicates that populist rhetoric about corporate profits will persist,” said EvercoreISI political strategist Tobin Marcus, in a note to the client.
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Brian Sozzi is a general editor and anchor on Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and in LinkedIn.
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