News Digest: Stock buybacks surge over new Federal taxes
February 9, 2023
A new federal excise tax on stock buybacks effective January 1 has been followed by a series of stare repurchase announcements. Over the past six weeks, these announcements have been more than double last year’s pace, says new research.
TrimTabs Investment Research says Chevron has led the way with a %75 billion buyback program over the coming years with others such as Exxon, Meta and United Parcel Services also making similar moves. The 1% tax will be levied by the federal government each time a company makes a share repurchase.
Experts believe that the 1% tax isn’t high enough to make a difference, a view that conforms to President Biden’s support for an even higher rate. He called for a quadrupling of the rate to 4% in his State of the Union address. However, corporate America holds the view that buybacks are the best use of outstanding capital at any given moment, which adds to shareholder value.