comment: >
  
  It was legal, it was just a legal grey area. During 1982, the government just clarified its position. At no point was there any law against it.
context: I’ve always considered stock buybacks to be a mechanism for extinguishing excess capital. Every company should have a capital allocation prioritization for what to do with excess cash. Reinvesting in the business via capital expenditures that return value, dividends, and stock buybacks are all options, each with risks and consequences. >
  
  They weren't illegal before hand.
  The law wasn't clear if they were a form of stock price manipulation.  So most companies stayed away from it, but they still happened.
  The sec simply clarified when it is perfectly legal.
  It's should be no more or less illegal, than issuing more stock to raise capital...
  If they no longer have the need for the capital, they should buy the shares back to gain more control of their company. >
  
  Tax stock buybacks the same as corporate profits. >
  
  It's not a profit. You could apply a special sales tax to buybacks. >
  
  You realize they are taxed right now at the same rate as any stock sale.
  You dont tax the stock sale, you tax the stock sale's profit.
  If I invest 100k in a stock, and they offer me 110k to buy it back, I pay taxes on the 10k.
  I didn't pay taxes when I bought the 100k worth of shares, and the company shouldn't pay taxes when they buy the 110k >
  
  We're missing each other's points because of reddit. The guy above me wanted to tax buybacks as profits which doesn't make sense - i was suggesting that what he's really asking for is to apply a tax to the buyback.
  I understand that this is not currently the way the code is written, but it could be done if the policy goal is to discourage buybacks. You could write it so it only applies to original issuers of the shares so it doesnt have implications for private citizens. >
  
  I guess.  I just see nothing wrong with buybacks.  Zero.
  It encourages investment, and better run companies. >
  
  How does it encourage investment and better run companies? If a company needs to raise funding, they would issue more stock. All the large stock buybacks I've seen have been done with cheap government loans. They occurred in 2008 using the insanely cheap cash the feds kept dumping into banks. Then again under Trump's massive tax cuts for corporations. And again with misused and abused covid relief funds. This effectively acted as a massive transfer of wealth from all citizens who pay taxes to the ever smaller percentage of citizens who own stocks.  
  In 2019, right after Lowe's CEO said their employees were their greatest asset, Lowe's laid off thousands of their most experienced workers while issuing $10 billion in stock buybacks, the stock buybacks fueled by Trump's tax cuts. Lowe's then turned around and offered the people they fired their jobs back, at lower pay, and in some cases lower pay than they'd originally been hired at.   What beautiful reinvestment.  
  I've yet to come across any article or study showing stock buybacks as good for the economy. Only think tank bullshit, funded by the wealthy elites who benefit from the broken system. >
  
  It incentives investment by pay back investors at a gain. 
  If companies don't return dividends, and not do stock buy backs over time their stock just dilutes every time they issue new stocks.
  The more investors, the harder it is to run a company. The more beholden they are to the investors. Fewer investors let's them run the company better. 
  If issuing shares is OK to raise capital, once they no longer need the capital they should buy those shares back.
  You haven't stated one thing wrong with buy backs.  You have simply claimed that the money wasn't theirs so they took advantage of cheap money. 
  Why are share buy backs wrong?  
  Is it also wrong to issue shares? >
  
  Nothing wrong with stock buybacks for your above stated purpose, except it is the same institutional line from the think tanks and shows no evidence of improving the economy (still haven't been shown any evidence that stock buybacks improve the economy). My main issue is the blatant abuse of government financial policy to buy back stocks with money that was meant to stimulate economic and job growth. Something that has occurred repeatedly in the last decade.  
  This method of financial grift exploded after 2008. Government bailouts of bankrupted financial institutions then turned around and awarded massive golden parachutes and bonuses to the same twerps who caused the crisis. There was massive public uproar over these assholes awarding themselves with public provided funds. So now massive buybacks are used to transfer the wealth meant for the workers to investors and owners. Doesn't cause the same uproar because it is sold as stock prices went up, so everyone is doing better! (Except the thousands laid off by Lowe's.) >
  
  Once shares are issued and sold on the open market... why should there be a law against buying back the bits of ownership of your corp  that you sold away? 
  I know this can lead to an artificially inflated share price, but the answer to that is due dilligence - dont buy overpriced shares. Or rather understand that when you buy stocks youre buying fractional ownership in a corp. Dont overpay. >
  
  This make perfect sense.  I never understood why people get upset over stock buybacks. >
  
  When your company spends $1 billion dollars on stock buybacks and gives no one raises because of it, people might have a small reason to abhor stock buybacks. >
  
  The thing with this view is that it assumes that companies pay their workers out of generousity. 
  The way it's supposed to work is that there is a competitive market for labor and liveable wages are just what needs to get paid to get the work done. After all, the incremental productivity of each worker should far exceed their pay (otherwise this enterprise is likely not accretive to the macro economy).
  Measures to improve imbalances in the labor market; transparency requirements in job descriptions, unemployment insurance, and yes organized labor, all promise to help. 
  Making corporate finance less efficient by "banning" a common method of returning capital to owners may seem satisfying. A portion of that capital is likely only there at the expense of labor. But this is a symptom of imbalance, not the cause. 
  Put simply, fix the labor market, then let companies who are still profitable after well compensating workers return whatever profits they want to owners in the most efficient way. Those owners are investors who backed a company who pays well, we should all want them to be rewarded. >
  
  You realize livable wages aren't a thing for over 60% of Americans right? The CEOs had thier time to use fancy words to fleece everyone. The bottom line no matter how much fancy language you use is that business owners are fucking greedy and aren't paying a liveable wage and still always want and need more. >
  
  Why is banning stock buy backs the response? It just seems like there are much better ways to address the power imbalance between labor and capital then to ban stock buy backs. >
  
  Multiple measures need to be taken. You honestly don't see any problem with the company using all of it's money on buying back stock so that it is unable/unwilling to even give col raises? You must be a person of true privilege. >
  
  
  Multiple measures need to be taken. 
  
  Ok. I don’t see why banning stock buy backs would make a meaningful contribution to that pursuit.
  
  You honestly don't see any problem with the company using all of it's money on buying back stock so that it is unable/unwilling to even give col raises?
  
  Banning stock buy backs won’t make companies more likely to increase employee compensation.
  
  You must be a person of true privilege.
  
  Nope. I just understand how companies work. Banning stock buy backs won’t have any serious impact on employee compensation. >
  
  Stock buybacks and offshore tax havens  were both gifts from Reagan. They should both be done away with and have been major factors in creating the terrible wealth inequality we must endure. >
  
  Stock buybacks are essentially dividends an organization doesn’t have to pay tax on. All they are is a simple tool to return equity back to shareholders. The stock buyback “issue” is a huge red herring and not a real issue. Anyone with basic financial literacy should understand this as just another way for corporations to return equity to their shareholders. Unless we fundamentally alter how our financial markets and public companies operate then they will seek out avenues for this exchange. 
  If stock buybacks are outlawed then all you’ll see is a shift back towards dividends. You could argue in favor of this shift because it generates additional tax revenue for the state. But stock buybacks as a legal financial mechanism are a boogeyman, non-issue compared to the larger problems of late stage capitalism. >
  
  Dividends incentivize pricing stocks as long term investments whereas stock buybacks incentivize growth stocks. Growth stocks are ore volatile. Volatility is generally bad. >
  
  I’m sorry and not trying to be rude but none of these statements make any sense. What evidence exists that stock buybacks are incentivizing growth in materially different ways than dividends? And what does volatility being generally bad mean in this context? Are we just going to ignore the inherent value in volatility helping drive innovation in a capitalistic system. 
  I’m trying to see what the case for outlawing stock buybacks here is and I don’t see it. >
  
  Moral hazard, allow the board to dramatically increase short term price at the potential cost of long-term growth, and even can increase risk to business because they have less cash if the economy turns.
  It's just a way for people who want to sell to get their buy side taken care of quickly. >
  
  
  Moral hazard, allow the board to dramatically increase short term price at the potential cost of long-term growth, and even can increase risk to business because they have less cash if the economy turns.
  
  So basically no risk to anybody involved with planning the buyback since executives are always only looking at short-term profits anyways?
  And if the company runs in to trouble because of the buyback, just do some layoffs and the stock price will rebound anyways >
  
  You do realize that the reverse of a buyback is issuing shares, right? A company can always raise more money by reissuing the stock they bought back. Stock buybacks work by taking shares out of circulation and increasing the earnings per share. Essentially, instead of $1000 of profit being shared amongst 100 shares, now it is $1000 shared amongst 90 shares. >
  
  I understand what a stock buyback is. I'm saying our current system only incentives short-term thinking. All that matters is the stock price because you have to keep the shareholders happy.
  Issuing new stock lowers the stock price, layoffs tend to raise it. >
  
  Dude, you have it backwards. Stock buybacks can be reissued to raise funds. Companies can literally buy back their own stock and reissue it to make back the money. It is literally the company investing in itself and rewarding shareholders at the same time. >
  
  I'm not even sure what you're trying argue. No one is confused about companies being able to issue more stock. That was never in doubt.
  I think I misinterpreted the previous posters comment about moral hazard to be why a company would hestiate to buy back stocks when now I think they meant the moral hazard was a reason to ban buy backs (which I agree with).
  However that makes none of what I said false. If a company needs money, issuing stock is not their go-to move because it lowers the stock value. If they can find the funds another way, and layoffs are a common answer, that's what they'll do.
  The whole point is companies want a high stock price and will sacrifice tomorrow's profits if it increases today's stock price >
  
  I don’t see a problem with it. People invest in businesses to make money, what difference does it really make whether that money comes from shareholders paying themselves dividends or buying out other shareholders? >
  
  I think the main argument is the money spent on buying back a companies own stock is money not being spent on new investments, so they aren’t contributing to growth. 
  So rather than training new employees, or rewarding your existing employees, you are concentrating the wealth of a company into your current shareholders without really adding to economic growth in any way. >
  
  That same argument applies to dividends. Without any way of getting a return from their investments, why would you expect potential investors to deploy their money? >
  
  Dividends at least create a taxable event.
  So no, they aren’t the same. >
  
  A taxable event, such as investors earning capital gains on the stock they sell back to the company, and then paying tax on that? That kind of taxable event? >
  
  Assuming they sell. Stock buybacks by themselves don’t create a taxable event. So no. >
  
  By definition, someone has to sell. The company can't buy its stock from nobody >
  
  Jeez, some of these replies are interesting. Stock buybacks just allow investors to trigger the taxable event when want it whereas dividends don’t offer that same option. >
  
  Stock is just a fractional ownership instrument, why shouldnt a business be able to buy back itself? The market is already going to price the fact that stock price going up is the result of buy backs either way >
  
  Because socialists don’t value freedom. >
  
  Yes, I don't value the freedom to starve to death while someone else lives in luxury just because they were born into wealth 50 years ago. >
  
  Oh wow.  We’re talking about stock buybacks.  All it does is reduce the amount of outstanding shares to the public.  The end result is better dividends and investment returns for people like your grandma and grandpa who are living on a fixed income.
  This is not a political issue. >
  
  You forgot the part where capital gains are taxed a much lower  rate than income, and only at the point of sale instead of annually.  
  In combination with existing tax law it allows for unproductive people to pay lower tax rates than people who actually work for a living, such as doctors and teachers. >
  
  To describe investors as unproductive people is a very Marxist line of thinking. Investors making the risky decision to invest their money is essential. If you don’t like the tax rates for stock buy backs, then why not advocate for changing the tax rates instead of banning the practice? >
  
  Okay I don't mean to paint every American with a 401k (investors) as unproductive.   But there do exist unproductive investors outside of retirees.  Trust funds are a thing.
  Yes, fixing tax rates would be the better solution.   But still, stock buybacks in combination with capital gains are a problem.   People could pick either part of that system as the culprit.
  Having a tax system that encourages investing is good.   Having a tax system that allows unproductive people to live off of inherited fortunes is bad.   
  If you want to get into it, I would argue that the usual justification for this sort of tax system is based on the risk of owning a single share of stock rather than the cash equivalent.  That argument does not take into account the reduced risk of owning a diverse portfolio over a long period of time.   Taxes on large portfolios that cross generations should be much higher.   Or just simplify things with a wealth tax.  Then buybacks can become less relevant just like all the other crappy loopholes. >
  
  
  Okay I don't mean to paint every American with a 401k (investors) as unproductive.
  
  Good.
  
  But there do exist unproductive investors outside of retirees.  Trust funds are a thing.
  
  Why do you think trust funds are an example of unproductive investing? Definitionally I don’t even understand the concept of unproductive investing, because investing is productive.
  
  Yes, fixing tax rates would be the better solution.   But still, stock buybacks in combination with capital gains are a problem.   People could pick either part of that system as the culprit.
  
  What do you mean when you say capital gains are a problem? Are you referring to the tax rate or the fact that it exists?
  
  Having a tax system that encourages investing is good.   Having a tax system that allows unproductive people to live off of inherited fortunes is bad.
  
  Investing money is productive. I don’t see why inheritance is inherently bad. I think it needs to be taxed to inhibit wealth inequality, but i don’t see people living off the investments of their inheritance as unproductive. >
  
  Sorry if I wasn't clear.  I consider the low tax rate for capital gains to be a problem.   I consider the complete lack of tax for certain unrealized gains to be a problem.  The argument is usually that we need to incentivize investing because of the risk involved.  My argument is that the risk is negligible for a properly diversified portfolio over a 20+ year period.  Therefore capital appreciation of such portfolios should be taxed annually as ordinary income to the owner, and not delayed until the point of sale for stocks or bonds at a rate far below the ordinary income rate.
  In today's world, a person who inherited large wealth would be told the safest way to keep their money is in a diversified portfolio.  They are not assuming risk or themselves being productive.  They should not get the preferential treatment of current capital gains tax rates and timings.
  I'm complaining about the person being unproductive.   Just spending the interest on a fortune without innovating or even managing their portfolio.  It's the stuff of dynasties and royalty, and is the real American dream of today's world:  get rich, then move to America, buy stuff cheap, and enjoy world-class tax loopholes for the investor class. >
  
  like /u/kawkxp71 said, stock buybacks were not "illegal" before.  10b-18 is about the anti-manipulation laws, which are there to protect investors in the stock market, not the rest of us.  I happen to be a securities lawyer so I'll just share that 10b-18 is a kind of safe harbor also, so a company doesn't HAVE to use it, and it also doesn't apply to every situation.  I am sure it made companies feel safer to do buybacks, but I doubt 10b-18 is the only thing that made buybacks more popular.  
  In my experience, public company boards have done buybacks when they have a lot of surplus capital and the directors can't figure out a good way to invest it.  Often what they want to do if they have a lot of extra cash is go buy more companies and grow their business.  
  But sometimes they may have tapped out that growth.  
  Also, operating companies have to be careful about investing too much in actual securities because then they could wind up accidentally turning into an "investment company" which would be a disaster.  So they may not be able to or want or have internal expertise to invest in something besides more operations.
  However, directors are fiduciaries and have to do something profitable with the company's assets.  they can't just let it sit there in a checking account.
  I am liberal and would actually wish they would use that extra money to pay workers better, frankly.  But I don't think securities regulation is a good tool for trying to make that reform happen.
  I like the idea of making workers part owners, and wish more companies would do that, and on a wider scale.
  Better yet, I would like to see our economy move to more public benefit corporations.
  I think the problem is that it's hard to get a business off the ground without investment, and you can't get the capital for free.  So right from the start, the shareholders and lenders dictate all the terms.  It's a stacked deck. :( >
  
  Thanks for adding your perspective! It does feel like a stacked deck. >
  
  you're welcome and I think it really really is a stacked deck.  and worse, it snowballs, so that the deck just keeps getting more and more stacked!!  It's the way that investors wind up owning ALL THE FUTURE PROFITS FOREVER AND EVER that really makes no sense.  I will share although it's a little embarrassing that when I was a teenager I was briefly smitten with Ayn Rand.  I grew out of it in college, but I remember when the light bulb came on for me.  That whole way of thinking, that the dude with all the capital was somehow the genius that figured everything out, is so untrue.  In real life, the dude with the capital is never the genius!  There are always all these "helper" people who figure everything out.  The guy who opens a restaurant is so often NOT a chef or even an expert in managing people.  It's just a guy who wanted to find a way to generate a stream of income that would flow from the labor of others.  That is not always true.  But it's often true! >
  
  i have never heard an argument for banning stock buybacks that deserves to be taken even a little seriously. i say this as someone that loves playing devils advocate for lots of awful ideas just for fun
  stock buybacks are a way for managers of public companies to return excess cash to their owners (the shareholders). if the managers can’t find projects that generate a sufficient return (above their cost of capital for anyone that cares), investors should redeploy that capital elsewhere. 
  how does a company return capital to its rightful owners? there are two basic choices: dividends (sending all the investors cash) or stock buybacks (buying back stock in the open market, which makes all the outstanding shares worth more). stock buybacks are more tax efficient and typically signal management’s confidence that the stock is undervalued, so companies like this option. 
  these are very first principles.
  why do buybacks elicit hysterical shrieking while dividends do not? before discussing an appropriate public policy response, we should establish that there’s an actual issue here (and there isn’t one).
  if you think firms don’t pay enough taxes, change the tax code. same with competition policy. throwing up arbitrary obstacles that prevent capital from flowing where it can be most productive is just kneecapping your own economy for no good reason >
  
  Whether or not there is an actual issue here is hard to pin down. How can we go from "stock buybacks are market manipulation and therefore illegal" to "regulating stock buybacks at all is hysterical"? I like the question to be in the "tax code" discussion and not the "executive pay" discussion.
  To me it seems like a short sighted mechanism to achieve a vastly imperfect economy. I'd love to get your perspective on these comments as you seem to have more knowledge than I do.
  There seems to be a tendency for a stock price to rise at the annoucnement of a buyback, by about 3.5%, and outrise their peers in the coming months after the announcement.
  So for investors (and executives, but as alluded to this isn't worth bringing up) value is created. But the value is mostly artificial. This entire system of share buyback happens outside of the business of buying and selling goods and services. It serves no function to society at large, only the investor class owners of the company.
  So in my view, I think I agree with the pre-1982 thought that the practice is more or less stock price manipulation. If you want to return money to the shareholders, pay the taxes to do it in dividends. Or take the profit and pay taxes on it. I don't think it's good for the US that 800 billion dollars was used in 2021 to avoid corporate income tax, avoid taxes on dividends, and was instead used to buyback shares for firms that can sell them later and pay long term capital gains tax instead of the initial income tax.
  It also creates more risk for society. If there is a financial collapse a la 2008, not only do firms have a huge loss in their self-investment, but the social safety nets that never materialized due to shareholders keeping their gains instead of being taxed create a society that will be worse off. >
  
  companies buy back stock pursuant to plans that are disclosed to markets. they also comply with SEC rules governing when and how they can do so. 
  again, theyre also a very basic part of running a public company. returning excess cash to investors. unlike dividends (which cant really be cut without damaging market perceptions), buybacks can be done or stopped at management’s discretion. this is corporate finance 101.
  im not going to address terms like “market manipulation” or “financial stability” because they are completely irrelevant to the narrow issue of stock buybacks. >
  
  But you don't disagree that it is worse for society? >
  
  of course not. why would you ask me this lol? banning stock buybacks would be terrible for society
  there are plenty of actual dragons to slay if you want to make society better >
  
  I definitely think there is an argument that you shouldn't get government subsidies in time of crises if you did a stock buyback but besides that i dont see any reason to ban them. If you ban them they will just do increased dividends. If you ban that......then you are essentially just banning the concept of equity in a company. >
  
  Why deny government subsidies in times of crises to companies that do stock buybacks? I don’t like it when companies underinvest in their employees in favor of capital, but I don’t think that should preclude them from financial aid in a time of crisis. I think it would probably do more harm than good for working people if their employer was denied aid in a time of crisis. At the end of the day, I think companies should be allowed to buy back their own shares to hold on to for a rainy day. In a time of crisis, let them sell it to the fed as a buyer of last resort for a federal premium and manage the easing that way. It would be fairly innocuous and avoid a market disaster.
  EDIT: I would be genuinely interested to hear a refutation from the people downvoting me. There are a lot of things I think should be done to strengthen workers rights, but I don’t think banning stock buybacks is one of them. The IRA included a 1% tax on stock buybacks and imo that is a welcome development. >
  
  We made it a long time without stock buybacks.
  The vast majority of the time they are used to manipulate the company valuation, EPS, C level bonuses, and extract value from the company. Most companies have been buying back shares when their valuation is high and selling shares when their valuation is low. They're basically lighting their own money on fire and making the company less stable as they do so.
  Ban them. There is no good argument for them. >
  
  Let me preface my response by saying thanks for your considerate response.
  
  We made it a long time without stock buybacks.
  
  I don’t find long time arguments persuasive, because human history is full of examples of bad long-term practices. I’d be very happy to expound on this and any other point if you disagree.
  
  The vast majority of the time they are used to manipulate the company valuation, P/E ratio, C level bonuses, and extract value from the company.
  
  This is a good point. In a completely free market there is a perverse incentive for executives to use stock buybacks to manipulate the stock price in a way that would juice their contracts. Such a scenario would result in an enormous payday for themselves at the expense of the company, it’s employees, the community, and the economy at large. That is clearly unacceptable. I think we can neutralize this kind of perverse incentive with heavy regulation of stock buy backs and executive compensation. I don’t think it is impossible to allow stock buy backs while simultaneously preventing that behavior.
  
  Most companies have been buying back shares when their valuation is high and selling shares when their valuation is low. They're basically lighting their own money on fire and making the company less stable as they do so.
  
  I would be very interested to read about this if you would be so kind as to provide some supporting sources.
  
  Ban them. There is no good argument for them.
  
  I would support this argument if you or anyone else could persuade me that there is in fact no good argument for them. Presently, I see value. However, I’m genuinely here in good faith and my mind can be changed through persuasive argument. >
  
  I would argue that they're functionally no different from dividends. All of the so called manipulation can be done exactly the same with dividends.  
  Companies rewarding CEOs based on stock price can and does also happen based on dividend payouts.  
  Companies deciding that short term profits are more important than investing in the company/workers/etc is a reflection of what shareholders want, not the method they use. It can be accomplished just as easily with dividends. Shareholders are shortsighted, and will reward the CEO for returning them money as fast as possible - that will happen via dividends or buybacks, there's no difference. It's putting the cart before the horse to blame that on buybacks. >
  
  
  I would argue that they're functionally no different from dividends. All of the so called manipulation can be done exactly the same with dividends.  
  
  They can't though. They are not functionally the same, even if people want to believe they are.
  
  Companies rewarding CEOs based on stock price can and does also happen based on dividend payouts.  
  
  But it happens with much more frequency and severity with buybacks.
  
  Companies deciding that short term profits are more important than investing in the company/workers/etc is a reflection of what shareholders want, not the method they use. It can be accomplished just as easily with dividends. Shareholders are shortsighted, and will reward the CEO for returning them money as fast as possible - that will happen via dividends or buybacks, there's no difference. It's putting the cart before the horse to blame that on buybacks.
  
  
  
  This is why the board of directors should have half the seats reserved for employees. Obviously "shareholder value" is not an effective way to run an economy.
  
  
  This is why stock buybacks should be heavily regulated
  
  
  Dividends are also a problem, but your argument is not persuasive at all. We can see the effect of stock buybacks vs dividends and have decades of research on them. How come this only became a severe problem after buybacks were let off the chain?
  
  
  None of your arguments are persuasive at all. You have quoted no sources, while I did, and you speak in hypotheticals, not what is and what has actually happened, which I have. >
  
  Also, let's not forget that executives are often paid in stock options, which are considerably more valuable as the stock price increases. Their own comp is tied more to the stock price than the financial performance or stability of the company.
  In theory, the market price should reflect those via pricing the expectation of future earnings. But anyone whose watched the markets for the last 3 years and think that that's really true hasn't been paying attention. Remember when Tesla was worth more than every other auto maker combined, for years? >
  
  How are stock buy backs political or controversial in any way?  
  They increase shareholder value.  That means better returns for grandma and grandpa’s retirement account. >
  
  They're controversial because they're a highly visible symptom of the inequality between labor and capital. In recent decades, capital investment has significantly outperformed labor, many people see that as unfair, and wealth inequality is probably at a level where it's now inefficient overall (irrespective of fairness).
  They are also a perfectly normal and benign way of returning excess profits to owners. Banning them is asinine, just making corporate finance less efficient. A few steps down the line and "less efficient" just means "incentive for financial innovation to re-capture some of the value", as far a Wall Street is concerned.
  What people really want (I think), is for there to be less profits available for owners. For a greater proportion of those funds to have gone to labor so that the lowest paid worked are not being simultaneously propped up by government welfare. The solutions to the labor market are more complex, and maybe harder to sell politically, but they do hold the advantage of actually addressing the issue in a meaningful way. >
  
  If that's what they want the public policy implication would be to I suppose force union representation on company boards or force pension funding on large enough corporations. I don't really see this as a net benefit for the general public or for wealth inequality but if certainly would redistribute profits from ownership to workers. >
  
  I feel like OP is severely straw-manning the case for stock buybacks. He lays out Lazonick's central thesis, while only citing one of Edmand's supporting arguments. 
  Edmand's thesis is that companies should and do return excess capital to investors, who can reinvest it in startups with actual investment opportunities instead of empire building. 
  
  Responsible companies don’t invest willy-nilly; they invest when opportunities are good, and show restraint when opportunities are bad. A restriction on repurchases could take us back to the 1970s, where CEOs simply wasted free cash on building empires – RJR Nabisco being a prime example – rather than paying it out to be allocated elsewhere. Repurchases allow shareholders to reallocate funds to young, high-growth firms that are screaming out for a cash injection.
  
  In support of this argument, he doesn't just rely on more than just a survey of executives. He also argues that: 
  
  Firms that buy back stock subsequently beat their peers by 12.1% over the next four years. 
  In poorly governed firms, $1 of cash is valued at only $0.42 to $0.88. 
  Buybacks are less sticky than dividends because they're inherently seen as one-off events. 
  Buybacks are more efficient because they only return excess capital to investors who have alternative investment opportunities. "No rational investor would sell their stock and just horde the cash."
  Higher CEO ownership stakes typically improve long-term stock returns.  
  
  TLDR; If you don't like companies being big, then you should be in support of stock buybacks.   
  Also, to add onto this pile, most publicly traded tech companies and many non-tech companies pay their employees in stock. For example, a senior Google Engineer may get $200k in cash and $120k in stock. These stocks come from a pool of shares held by the company treasury, every so often, the company needs to refill the pool. >
  
  I would be okay with buybacks if capital gains were taxed as ordinary income. >
  
  Capital gains and dividends are taxed the exact same way.
  
  If you've held the stock for less than a year, it's taxed as ordinary income.
  If you've held the stock for at least a year, it's taxed at the capital gains rate.
  
  Do you hold the same view on dividends? >
  
  I assumed dividends were always taxed as ordinary income, I had no idea about qualified dividends; I was always a growth investor and only cared about capital gains.  TIL.
  So to answer your question:  Now that I know dividends are also given preferential treatment, I am against that too.   I think the risk of investing in a properly diversified portfolio over a long period, say 20+ years, is low enough that it doesn't need preferential tax treatment.  
  When I was younger it was what... 30% short term cap gains tax and 15% long term.  Now it's just 15% across the board with lower transactions and lower risk from more accessible diversified funds.  The average gains of the stock market over the last 40 years should be enough evidence that there is more than enough incentive to invest.   We don't need to provide investors with a lower than normal tax burden that exacerbates inequality to keep people contributing to their 401Ks. >
  
  Did not realize that was NOT legal before 1982. Yet another love-tap from Reaganomics that screwed the bottom 90% without thank-u-ma'am.