Wall St. in pols’ crosshairs
Propose a stock buyback tax that could raise billions
ALBANY — State lawmakers have taken stock of Wall Street and they don’t like what they see.
A pair of Democratic legislators plan to roll out a piece of legislation Tuesday that would tax corporate stock buybacks, a way that companies return “excess” cash to shareholders, and they say the plan could boost state coffers by billions.
The practice of buying back stocks, also known as openmarket share repurchases, gained national attention in the wake of the 2017 federal tax overhaul that left major corporations flush with cash.
Many of those companies chose to reward investors rather than put the money toward hiring more workers, raising wages or investing in research and development, according to bill sponsor Assemblywoman Yuh-Line Niou (DManhattan). “When businesses buy back their own stocks, one would assume there’s some sort of fee, but there isn’t,” Niou told the Daily News. “This is money that goes right back into the pockets of companies’ shareholders without actually going into workers or the labor force, or even benefits or higher wages.”
When a company buys its own stock back, it reduces the number of publicly traded shares, briefly boosting the value of the stock to the benefit of shareholders and corporate leadership. There are no taxes, paid as there are with dividends, and the practice does little to stimulate the economy and even less for employees, the measure’s proponents argue.
The bill would amend state law to tax corporate stock buybacks in New York at the rate of 0.5% of the value of open-market share repurchases.
Sen. Jen Metzger (D-Hudson Valley) said the proposal stems from her search for a progressive plan to help reduce municipalities’ reliance on property taxes to fund education. “We see these really significant inequalities that, in my view, are inconsistent with our constitutional obligation in New York to provide everyone with a good, sound quality education,” she said.
Some analysts believe the measure, long a priority of progressive advocates, could be a boon for the state, raising more than $3 billion annually.
The Roosevelt Institute, a liberal think tank, said in a report that there is little oversight of the buyback process, ample opportunity for conflicts of interest and market manipulation, and long-term negative repercussions on the stock market.
Members of the powerful Communications Workers of America plan to attend a rally outside the New York Stock Exchange on Tuesday to highlight their support of the measure.
The CWA points to actions taken by companies such as AT&T, which it argues has laid off thousands of workers despite significant earnings in the wake of the passage of the federal Tax Cuts and Jobs Act.
“To add insult to injury, AT&T has committed to spending over $30 billion in stock buybacks, lining the pockets of a small group of greedy investors at the expense of working families,” said Bob Master of CWA District 1. “We need this legislation to fight corporate greed and ensure that big corporations like AT&T are putting workers and consumers first.”
Opponents warn the tax could disrupt the city’s financial industry and cause concern among investors. E.J. McMahon of the Empire Center, a conservative fiscal watchdog, said any tax treatment of stock buybacks should be left to the feds and warned the proposal could have major ramifications extending well past Wall Street.
“Enactment of this bill would be self-destructive and self-defeating for New York,” he told The News.
“It would surely depress trading activity and employment on Wall Street while also depressing the share price of stocks in which public pension funds have major investments.”