Page 15 - Investment Advisor September 2022

• Levies a 1% excise tax on public code, tax deductions designed to incent ment. “Even as millions of families
companies’ stock buybacks; corporations to invest in their companies.” struggled through the pandemic, cor-
• Extends a provision in the tax “A corporate ‘AMT’ [alternative mini- porate stock buybacks once again hit
code that limits the losses that the mum tax] will disproportionately hurt all-time highs. Stock buybacks are
wealthiest taxpayers can write-off certain businesses and not others, leav- currently heavily favored by the tax
their taxes to $500,000 per year; and ing the Democrats open to the attack code, despite their skewed benefits for
• Provides the IRS with sufficient of ‘picking winners and losers,’” Bush the very top and potential for insider
resources to collect revenue from stated. “Depending on the industry, siz- game-playing.”
taxpayers who use sophisticated tax able tax credits and investments will Wyden said his proposal with Sen.
planning techniques to avoid taxes. support corporate demand, especially in Sherrod Brown, D-Ohio, “simply ends
A beefed-up IRS enforcement divi- clean energy.” this preferential treatment and encourag-
sion along with corporate es mega-corporations to
tax changes are two ways A beefed-up Internal Revenue invest in their workers.”
the Inflation Reduction Senate Majority
Act will hit wealthy tax- Service enforcement division along Leader Chuck Schumer,
payers, according to Jeff D-N.Y. said after the
Bush of The Washington with corporate tax changes are two bill’s passage that he
Update. The increase, ways the Inflation Reduction Act was “confident the
according to Bush, will Inflation Reduction Act
allow the IRS to hire will hit wealthy taxpayers will endure as one of
more agents, “arming the defining legislative
them with new technol- —Jeff Bush feats of the twenty-first
ogy focused on increasing century: our bill reduces
the audit rate substantial- inflation, lowers costs,
ly on those earning more than $400,000.” STOCK BUYBACK TAX creates millions of good paying jobs,
Audits exist, Bush said in an interview The bill’s 1% stock buyback tax “may and is the boldest climate package in
on Aug. 8, “to ensure higher tax-paying impact valuations,” he explained. U.S. history.”
compliance by those audited and those “While often buybacks are couched as This bill, Schumer said, “will kick-
afraid they might.” a corporation trying to boost their stock start the era of affordable clean energy
Greg Valliere, chief U.S. policy strate- price, they are more often a sign of cor- in America. It is a game-changer. It is
gist for AGF Investments, said in his porate health. The corporation sees no a turning point. And it has been a long
Capitol Notes email briefing on Aug. 8 better investment in the marketplace time coming.”
that “virtually all experts believe the bill than its own shares. The 1% tax tweaks
will dramatically increase the need for a corporation’s analysis of when and if a HOUSE PASSAGE
labor (thousands of employees for the buyback is in its best interest.” Valliere said the Senate bill’s passage
IRS and thousands to retrofit). This rais- A modified version of Senate Finance marks “the beginnings of prescription
es the issue of where the workers will Committee Chairman Ron Wyden’s drug negotiations.”
come from. The extraordinarily tight Stock Buyback Accountability Act was Bush of The Washington Update
labor market may revive an immigration included in the Inflation Reduction Act. expected the bill to pass the House,
reform debate next year.” The proposal would impose a 1% excise “albeit with some grumbling from pro-
Two changes to corporate taxes in the tax on the repurchase of stock by pub- gressives and blue state Democrats.
Senate bill affect stock valuations, Bush licly traded companies. They share the same concerns that
said: “The 15% minimum book profit “Rather than investing in their [Sen.] Bernie Sanders expressed: the bill
tax was a workaround for [Sen.] Kyrsten workers, mega-corporations used doesn’t go far enough.”
Sinema’s commitment not to raise tax the windfall from Republicans’ 2017 Biden, Bush added, “will sign what-
rates on individuals or corporations. But, tax cuts to juice their stock prices ever passes both chambers.”
it has the perverse side effect of penal- and reward their wealthiest investors
izing companies for using tax deductions and their executives through massive Washington Bureau Chief Melanie Waddell
Congress specifically wrote into the tax stock buybacks,” Wyden in a state- can be reached at [email protected].

SEPTEMBER 2022 INVESTMENT ADVISOR 11