The Inflation Reduction Act’s buyback tax restrains public company growth

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Preserving corporate buybacks complemented by other pro-growth tax and regulatory policies would lift all boats.

Buybacks also help a company grow because they empower a firm to reinvest excess cash back into the company itself to improve its overall worth on the market. The firm is then able to increase its short-term stock value and makes itself more attractive to potential investors. The buyback tax further destabilized the tax planning benefits that companies and their shareholders enjoyed with repurchase programs. If companies pay dividends from the corporate treasury, shareholders are taxed immediately. But if these firms instead use that money to buy back company shares, shareholders can defer taxes on the gain in value until they are ready to sell some or all of their shares.

 

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