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Opinion
Jared Dillian

The 1% Tax on Stock Buybacks Is Just the Start

Although small now, the levy will surely increase over time until it becomes too costly for companies to repurchase their shares. 

President Joe Biden’s Inflation Reduction Act may chill stock buybacks.

President Joe Biden’s Inflation Reduction Act may chill stock buybacks.

Photographer: Mandel Ngan/AFP via Getty Images

One of the provisions of the Biden administration’s Inflation Reduction Act is a small 1% tax on stock buybacks. The idea of a tax on buybacks is a bipartisan issue that has been around for a while. Florida Republican Senator Marco Rubio in 2019 proposed a plan to tax buybacks on equal footing with dividends, but that didn’t go anywhere.

The tax, however, is currently small enough that it is unlikely to deter buybacks or raise much in the way of revenue for the federal government. Considering that about $850 billion in buybacks were conducted in 2021, such a tax would have resulted in only about $8.5 billion in revenue, which is not remotely close to funding the government for a day.