Should the government tax stock buybacks?

Stock buybacks are the re-acquisition by a company of its own shares. It represents an alternate and more flexible way (relative to dividends) of returning money to shareholders. When used in coordination with increased corporate leverage, buybacks can increase share price. In most countries, a corporation can repurchase its own stock by distributing cash to existing shareholders in exchange for a fraction of the company's outstanding equity; that is, cash is exchanged for a reduction in the number of shares outstanding. The company either retires the repurchas…  ed shares or keeps them as treasury stock, available for re-issuance. Proponents of the tax argue that buybacks substitute for productive investments, thereby harming the economy and its growth prospects. Opponents argue that a 2016 Harvard Business Review study showed that research and development and capital expenditures soared over the same period when shareholder payouts and stock buybacks were rising sharply.