While specifically citing the estimated quarter-trillion dollars in stock buybacks that have already occurred since passage of the Republican Party's "tax scam" reform in December, Sen Tammy Baldwin (D-Wis.) on Thursday introduced a new bill designed to rein in the corporate practice that enriches wealthy executives and stockholders at the expense of workers and their families.
Since the GOP tax bill passed, Baldwin said in a statement announcing the bill, "corporations have announced more than $225 billion in stock buybacks, overwhelmingly benefiting corporate executives and wealthy shareholders, and leaving the middle class behind. Corporate boards—often at the urging of activist investors—now spend an inordinate amount of their profits buying back their own stock and issuing dividends, leaving minimal resources for long-term investments in workers, training and innovation."
"The surge in corporate buybacks is driving wealth inequality and wage stagnation in our country by hurting long-term economic growth and shared prosperity for workers. We need to rewrite the rules of our economy so it works better for workers and not just those at the top." —Sen. Tammy Baldwin (D-Wis.)Entitled "The Reward Work Act" (pdf), the legislation calls for improving disclosure of stock repurchases and would also require workers at publicly-traded companies the right to directly elect one-third of the board of directors.
"Corporate profits should be shared with the workers who actually create value," Baldwin added. "It's just wrong for big corporations to pocket massive, permanent tax breaks and reward the wealth of top executives with more stock buybacks, while closing facilities and laying off workers. The surge in corporate buybacks is driving wealth inequality and wage stagnation in our country by hurting long-term economic growth and shared prosperity for workers. We need to rewrite the rules of our economy so it works better for workers and not just those at the top. This legislation makes it clear that empowering the voices of our workers and investing in our workforce is more important than using tax breaks and corporate profits to reward shareholders with more stock buybacks."
As Common Dreams reported at the end of January, an analysis by the Americans for Tax Fairness found that only about 9 percent of the massive windfall corporations had received from the tax cuts had gone in any way to help workers. "Not only are few big corporations sharing any portion of their tax-cut bounty," the group stated at the time, "but the amounts going to workers pale when compared to how much the companies are getting in tax cuts and to how much they’re returning to shareholders through stock buybacks and dividends."
With the senator a longtime opponent of the practice, Baldwin's office said the insidious nature of buybacks was highlighted over recent months in her home state of Wisconsin where manufacturing giant Kimberley-Clark operates:
Across the country, there is a growing trend of big corporations using massive, permanent tax breaks for stock buybacks – choosing to reward wealthy CEOs instead of the workers who create profit and grow the company. In 2017, Wisconsin workers helped create $3.3 billion in operating profit at Kimberly-Clark. The company spent $911 million on stock buybacks last year and in December, Congress passed and President Trump signed a permanent, corporate tax cut for companies like Kimberly-Clark. Now, Kimberly-Clark announced that it will spend even more on stock buybacks this year. At the same time, the company announced that it would close two Wisconsin manufacturing facilities in the Fox Valley that employ 610 workers. Walmart pocketed a massive tax break, gave executives $20 billion in stock buybacks in 2017, and then in January they closed Sam’s Club stores across the country, including in Madison and in West Allis. Nearly 300 jobs were eliminated and workers were laid off.
Initial cosponsors of Baldwin's bill are Sens. Elizabeth Warren (D-Mass.) and Brian Schatz (D-Hawaii). It also has the support of the AFL-CIO, Americans for Financial Reform, Take on Wall Street and Public Citizen.
"Big corporations are using the GOP tax scam to reward CEOs while laying off workers," Warren said in a tweet. "I'm with her all the way."
Big corporations are using the GOP tax scam to reward CEOs while laying off workers. @SenatorBaldwin has a new bill to rein in stock buybacks and give workers a stronger voice. I’m with her all the way. https://t.co/t84mRNrENh
— Elizabeth Warren (@SenWarren) March 22, 2018
"The explosion of stock buybacks since the Trump tax cut has made clear that the real beneficiaries of the tax cuts are Wall Street and corporate CEOs, not working people," said Heather Slavkin Corzo, director of the AFL-CIO's Office of Investment, in a statement. "Workers get ahead when we increase their bargaining power and limit Wall Street's ability to suck wealth out of productive businesses. That's why the AFL-CIO supports Senator Baldwin’s legislation - because it will give workers a seat at the table to ensure that our economy once again rewards work instead of just wealth."
In a video and op-ed released earlier this week, former labor secretary and University of California at Berkeley economist Robert Reich, said that stock buybacks are a "boondoggle" for the American economy and a practice that for much of the nation's history was, in fact, prohibited.
Stock buybacks should be outlawed, argues Reich, as they were before the early 1980s.
Buybacks, Reich explains, "were illegal until Ronald Reagan made them legal in 1982, just about the same time wages stopped rising for most Americans. Before then, a bigger percentage corporate profits went into increasing workers' wages."
Watch the video—titled "Trump's Tax Buyback Bamboozle"—below:
Going further than Baldwin's bill, Reich calls for making stock buybacks against the law once more.
"Make stock buybacks illegal," he concludes, "as they were before 1982."