For decades, we’ve been letting the GOP tell us that corporate tax cuts could somehow fix our economy and balance the budget.
Turns out: corporations have been using that extra money to buy back their own stock, instead of creating jobs.
Last year, corporations in the S&P 500 index spent a combined $564 billion on stock buybacks. That’s more than 3.1% of the entire US Gross Domestic Product for 2014. Spent NOT on job creation… not on deficit reduction… but instead, spent on consolidating corporate ownership.
For decades, the political rhetoric about “cutting taxes for job creators” has been both accepted and effective.
But back when our country had a thriving Middle Class, corporations had top tax rates in the 50% range.
And we all waited for corporations to spend their extra money on job creation.
And we waited.
And we waited.
And somebody convinced the Securities and Exchange Commission to create its “Safe Harbor Rule” in 1982 – enabling corporations to buy back their own stock without fear of federal prosecution.
And under the radar, that’s exactly what corporations started doing. And I DO mean “under the radar.” Nobody knows exactly how much money US corporations have been spending on stock buybacks. Buybacks are tracked for the S&P 500 – which are the numbers I’ve used here –but not for all the other corporations that do business in our country. Even the SEC doesn’t keep statistics on overall stock buybacks.
But let’s take a minute to pretend.
Let’s pretend that our corporate tax rates weren’t so low (and there weren’t so many loopholes), and that the SEC’s “Safe Harbor Rule” had been repealed.
Here’s what that would have done, to the share of federal income taxes paid by individuals in 2014.
Yep. THAT’s why you should care about stock buybacks.
They’re coming out of your pockets, in the form of higher taxes.
Read more NHLN coverage of stock buybacks here.
Read Marketwatch, “Wall Street’s new drug is the stock buyback” here.