Senate Majority Leader Chuck Schumer (D-NY) and Sen. Bernie Sanders (D-VT) want to turn the screws on greedy corporations. On Monday morning, the New York Times published an op-ed in which the senators tee off on corporate stock buybacks while teasing new legislation that would ensure companies invest in their employees before padding the pockets of their shareholders.
“At a time of huge income and wealth inequality, Americans should be outraged that these profitable corporations are laying off workers while spending billions of dollars to boost their stock’s value to further enrich the wealthy few,” the senators write. “If corporations continue to purchase their own stock at this rate, income disparities will continue to grow, productivity will suffer, the long-term strength of companies will diminish — and the American worker will fall further behind.”
When a company uses its profits to buy its own stock, it’s not investing in research and development, increasing employee wages and benefits or other measures that strengthen the company as a whole. Instead, buybacks only serve to increase the stock’s value by reducing the number of publicly available shares. The only beneficiaries are corporate executives and wealthy shareholders. In other words, the rich get richer. It’s getting worse, too. As the senators note, 466 of the S&P 500 companies combined to spend $4 trillion on stock buybacks between 2008 and 2018. A quarter of that came in the last year alone, the result of the massive corporate tax cut Trump signed late in 2017. Remember? The one that was supposed to benefit working-class Americans? This hasn’t happened, of course. From December 2017 to December 2018, wages for average Americans have increased by $9.11 a week.
To put an end to out-of-control corporate stock buybacks, Sanders and Schumer are preparing legislation that would prevent corporations from buying back their own stock before first taking care of their employees. In effect, the legislation would set a minimum requirement for corporations to take care of their workers — through wages, sick leave, pensions, health benefits and more. If certain standards are not met, corporations would not legally be allowed to buy back their own stock.
No, this isn’t going to be legislated in this Congress. But the D’s are doing exactly what they should be: showing the electorate an alternative agenda targeted at the disparities Trump ran on addressing but is only deepening. [end]
— Jared Bernstein (@econjared) February 4, 2019
The wealth gap has been drawn into sharp focus since the new Congress took session last month, due in part to a plan from Rep. Alexandria Ocasio-Cortez (D-NY) that would impose a 70 percent marginal tax rate on annual income exceeding $10 million. Sen. Elizabeth Warren (D-MA), who this weekend is expected to formally announce her intention to run for president in 2020, followed with a proposal that would impose a two-percent tax on tax on a household’s wealth between $50 million and $1 billion, and a three-percent tax on wealth exceeding $1 billion. Both plans are popular among Americans. A poll released Monday by Morning Consult found that 45 percent of Americans support a marginal tax rate, as opposed to 32 percent who oppose it. The same poll found that 60 percent of Americans support Warren’s plan — including a majority of Republicans — while only 21 percent oppose it.
Most of the people who oppose taxing the rich are, you guessed it, rich people. Prospective billionaire presidential candidates Howard Schultz and Michael Bloomberg have both scoffed at the idea, as has New York City Mayor Andrew Cuomo.
Cuomo says he doesn’t believe New York should raise taxes on the rich to make up for the funding shortfall. “Taxes on the rich would be the exact worse thing to do,” he said.
— Josefa Velasquez (@J__Velasquez) February 4, 2019
At last month’s World Economic Forum in Davos, Switzerland, Ocasio-Cortez’s plan was met with laughter. When the Washington Post asked Dell Technologies CEO Michael Dell whether he supported a marginal tax rate, the multi-billionaire smiled. “No, I am not supportive of that, and I don’t think it would help the growth of the U.S. economy,” he said. “Name a country where that’s worked, ever.”
MIT professor Erik Brynjolfsson, who was sitting on the same panel, obliged him, explaining that from the 1930s through the 1960s, the United States averaged a 70-percent tax rate and the economy prospered during this period. “There’s a lot of economics that suggest that it’s not necessarily going to hurt growth,” Brynjolfsson said.
It would, however, mean people like Dell might have to suffice with a few less billions of dollars to their name. The humanity.