Two senior U.S. Senate Democrats on Friday unveiled a proposal to impose a 2% excise tax on corporate stock buybacks as lawmakers scrambled to find ways to finance President Joe Biden’s $3.5 trillion domestic investment plan.
Senate Finance Committee Chair Ron Wyden and Senate Banking Committee Chair Sherrod Brown said the “Stock Buyback Accountability Act” would encourage large corporations to invest in their workers rather than enriching investorsexecutives by boosting stock prices.
The proposal is among several floated by Wyden to boost government revenues, including imposing additional taxes on corporations that give out CEO pay that exceeds a certain multiple of the company’s average worker wages.
Biden and congressional Democrats have already been pushing to raise taxes on the wealthy and corporations to help pay the $3.5 trillion bill.
But resistance from moderate members of the party, including some who represent states or districts that supported former Republican President Donald Trump, have prompted Democrats to search for a new mix of revenue-raisers.
Republicans are attacking Democrats over the bill as both parties position themselves for the 2022 mid-term elections which will determine control of Congress.
Representative Kevin Brady, the senior Republican on the tax-writing House Ways and Means Committee, said Democratic tax hikes “could kill a million U.S. jobs, raise fuel prices and leave America more dependent on foreign oil.”
Democrats portray their effort as a “once-in-a-generation” chance to improve the lives of the elderly and disadvantaged children, address climate change and reform immigration.
Multiple House committees this week began considering amendments to the $3.5 trillion bill. Ways and Means has defeated several Republican amendments aimed at limiting its scope.
Next week, that panel is expected to debate the politically-charged issue of tax increases in the bill, which also contains some tax breaks for those earning less than $400,000.
The 2% stock buyback tax seeks to address Democrats’ frustrations with an increase in stock buybacks by publicly traded companies in 2018 after a massive corporate tax cut passed by Republicans at the end of 2017 that allowed firms to repatriate profits held overseas at low rates.
“Instead of spending billions buying back stocks and handing out CEO bonuses, it’s past time Wall Street paid its fair share and reinvested more of that capital into the workers and communities who make those profits possible,” said Brown, who is also a Senate Finance Committee member.
The Brown-Wyden legislation would prohibit companies from deducting the cost of the excise tax from their income but would exclude stock repurchases to fund an employee pension plan or employee stock plans.
In the face of strong Republican opposition to the legislation, Democrats in both houses of Congress aim to craft a bill that they can pass on their own.
That is particularly important in the Senate because under special budget “reconciliation” rules Democrats would not need the 60 votes in the 100-member chamber normally required to advance legislation.
The Senate currently is split 50-50 between the two parties.
House committees are expected to complete their work next week, which would leave leading Democrats in the House and Senate working on revisions to bring down the $3.5 trillion price to give it a better chance of passing.