Buyback Excise Tax Proposed

In the textbook, we discussed how buybacks have a tax advantage over dividends because it results in a lower effective tax rate for shareholders. A new law being proposed in the Senate would levy a 2 percent excise tax on all funds used for share buybacks. Although the statement released by the Senator Ron Wyden, who is proposing the buyback tax, essentially argues that buybacks are ill-advised, the evidence is not quite as clear.