Letter: Republican buyback lie

Republican buyback lie

Stock buybacks were illegal throughout most of the 20th century because they were considered a form of stock market manipulation. In 1982, the Securities and Exchange Commission under Republican Ronald Reagan changed the rules for stock buybacks, seemingly changing corporate mentality from considering social impact alongside profits to the only social responsibility of business is increasing profits.

Buybacks benefit CEOs and stockholders. About 80 percent of all stocks are owned by the richest 10 percent of Americans. An analysis of 121 Russell 1000 companies found that 57 percent of Trump's tax cut savings will go to shareholders, 20 percent directed to job creation and capital investment, and 6 percent to workers. Stock buybacks have been a prime mode of creating income inequality and eroding middle-class opportunities. Without buybacks, now a record over a record, Lowe's, CVS and Home Depot could have given each of their workers a raise of $18,000 a year, Starbucks $7,000 and McDonald's $4,000 but didn't. My perspective is the few bonuses and wage increases last year were PR stunts.

Stock buyback programs are generally an indication that the company's leadership believes its stock is undervalued or can make it look that way. Warren Buffett, who is willing to buy back at 110 percent of his company's stock book value, can't find a better place to spend company money. What about employees?

How does manipulation work? Let's say a company that still has revenue well above historic levels has a slightly off quarter it blames on inflation and the tariff but, wasn't much worse than other quarters since 2012, is flush with Trump tax cut money, reports a drop in share earnings causing its stock to plummet, then in a wink, wink of a businessman's eye, starts buying back major shares at the reduced price, followed by a miraculous recovery.

The perpetual Republican lie was corporate tax was 35 percent but the effective rate was 21.2 percent. Republican manna from heaven, Trump's tax cut, cut the top marginal corporate tax rate to 21 percent and dropped the estimated effective tax rate on profitable businesses to just 9 percent below the effective tax rate for households. The Chicago business barometer index has fallen four of the last few months and the stock market just nosedived, indicating Trump's tax cut is already running out of steam. Why do you vote Republican?

David Bean

Chatsworth

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