WASHINGTON, D.C. – Today, U.S. Senators Sherrod Brown (D-OH) and Ron Wyden (D-OR) introduced the Stock Buyback Accountability Act of 2023, which would increase taxes a publicly-traded company spends on buying back its own stock from one percent to four percent. This will help reinvest in the economy, while also preventing abuse and reducing tax avoidance, both of which are significant risks from stock buybacks. Brown and Wyden introduced this legislation following a record year for stock buybacks, which topped $1.2 trillion, and recent reports that stock buybacks continue to be a popular option for highly-profitable corporations. President Biden called for this increase in his State of the Union address, urging Congress to crackdown on wealthy tax cheats who exploit loopholes and avoid paying their fair share of taxes.

“Big corporations should never pay less in taxes than middle-class families. With the Inflation Reduction Act, we took the first steps to make sure corporations and Wall Street pay more of their fair share, but there is more work to do,” said Brown. “While corporations are raising prices to pad their profits and reward executives, Congress needs to do our part to hold them accountable.”

“It is not lost on the American people that corporate profits have climbed right along with the prices that families have been paying for groceries, rent, gas and other basics over the last few years. To see big multinational corporations announcing record stock buybacks benefitting their executives and wealthy shareholders at a time when so many families are feeling squeezed by inflation is simply offensive,” Wyden said. “Senator Brown has worked harder than anybody to ensure that big corporations and the wealthy pay their fair share, and that’s what this stock buyback proposal is all about. He and I wrote the bill last year that set the stock buyback tax at one percent, but it’s already clear that Congress needs to go further. We’re going to keep at it and pursue any opportunity to get this done.”

Brown and Wyden fought to include a version of their Stock Buyback Accountability Act of 2021 in the Inflation Reduction Act, which for the first time, imposed a one percent excise tax on corporate stock buybacks. This excise tax was in response to a 2017 tax law that delivered a massive tax windfall to wealthy corporations, leading to a record number of stock buybacks that enriched shareholders and CEOs instead of creating new jobs or raising workers’ wages. To curb this trend, the bill requires corporations to pay a tax on the total amount they spend on stock buybacks.

This legislation includes an improvement to rules for when a company buys back stock but then issues new stock, and it can generally reduce the amount of its buyback tax – this is referred to as the “netting rule.” One significant source of new stock issuance is stock compensation for employees, and this netting rule creates a small incentive to share stock with the employees of a company. But some companies may abuse the netting rule by increasing stock-based compensation packages to their wealthy executives, rather than sharing stock with their workers. To minimize this impact, this provision would exclude the stock compensation to the top executives and highest paid employees from the netting rule. A similar rule in the tax code already makes a portion of this compensation non-deductible.

In addition to Brown and Wyden, U.S. Senators Brian Schatz (D-HI), Chris Van Hollen (D-MD), Ben Ray Luján (D-NM), Jack Reed (D-RI), and Tammy Baldwin (D-WI) cosponsored the legislation.

Bill text is available HERE. 

###