This House would prohibit publicly traded companies from buying back their own stock.

econ

Buybacks were illegal in the U.S. until 1982. They are now the dominant form of shareholder return. Defenders argue they're tax-efficient capital return; critics argue they enrich executives at the expense of long-term investment.

Background

SEC Rule 10b-18 legalized open-market buybacks in 1982. S&P 500 buybacks hit $900 billion in 2023, exceeding dividends. The Inflation Reduction Act introduced a 1% excise tax on buybacks in 2023; Biden's proposed quadrupling failed in Congress. Lazonick's research at UMass Lowell argues buybacks have transferred trillions from R&D and worker wages to executives whose stock comp is correlated with EPS. Defenders point out that capital not returned through buybacks doesn't reliably go to R&D; it often goes to bad acquisitions or sits as low-yield cash.

Government opens with

Buybacks signal "we have no better use for capital" and reward stock-comp executives for the signal.

Opposition responds with

Banning buybacks pushes the same capital return into less-efficient channels like dividends and special distributions.