Democrats haven’t even taken over Congress yet and they’re already targeting corporate stock buybacks. Why?
By Ira Stoll | The Washington Free Beacon
Senator Elizabeth Warren, the Democrat from Massachusetts who is set to take over as chairman of the Committee on Banking, Housing, and Urban Affairs, is trying to block General Motors from a $20 billion stock buyback plan.
A letter from Warren to the GM CEO, Mary Barra, complains that the buyback would “enrich … shareholders” and “prioritize investor profits,” Bloomberg News reported. Isn’t that precisely what corporate managements are supposed to do?
Senator Warren has frequently expressed concern about the federal deficit and also desire for increased federal spending. If longtime GM shareholders sell, they’ll have to pay capital gains tax. You’d think Warren would be happy about the potential for capital gains tax revenue from the buyback plan. Yet even the prospect of more federal tax revenue for Warren and her fellow politicians in Washington to spend apparently isn’t enough to allay her anxiety about the danger that some shareholder, somewhere, might—heaven forbid—make a profit.
If this is going to be Senate Democrats’ attitude toward shareholder profits, it’s going to be a long and rough two years for American investors. Warren appears to have been inspired by the incoming senator from Michigan, Abdul El-Sayed, who campaigned alongside socialist Bernie Sanders. On October 21, immediately after GM announced the buyback, El-Sayed posted, “GM just announced the biggest stock buyback in automotive industry history. Instead of investing in their workers or new product lines, GM executives are robbing from the future to pay themselves and their shareholders today. Stock buybacks should be illegal.”
If it were left up to El-Sayed, the American auto industry, and our entire economy, would be as pathetically stagnant and impoverished as that of Egypt, his ancestral home. The per capita GDP there is between $3,000 and $4,000 a year, where it’s been stuck for about a decade.
Warren, along with the Democratic leader, Chuck Schumer, and the top Democrat on the Senate Finance Committee, Ron Wyden, introduced legislation in June proposing to quadruple the tax on stock buybacks. That effectively gives companies an incentive to do the buybacks now before the Democrats take over and quadruple the tax.
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