Albany Failed to Act on Buybacks in the Budget, but New York Has a Second Bite at the Apple

Businesses have seen a massive tax cut as a result of the GOP tax law, but the jobs promised with the Tax Cuts and Job Act have yet to materialize. Instead, companies are using their windfall to buy their own stocks, artificially inflating stock prices and padding the pockets of executives and wealthy shareholders while failing to invest in their workers or even the long-term growth of the company. The high-profit, low-wage economy we have as a result of this decades-long practice is not inevitable.

In Congress, two recent bills have been proposed to curb stock buybacks and rebalance economic power. The Worker Dividend Act of 2018, introduced by Senator Cory Booker (D-NJ), requires every company to pay a dividend to its workers commensurate with the amount a company issues to its executives and stockholders in the form of stock buybacks. The Reward Work Act, introduced by Senator Tammy Baldwin (D-WI), bans stock buybacks and requires companies to allow one-third of their boards to be voted on by employees. Both of these are good ways to realign incentives, but it is unlikely that the same Congress that gave these handouts to Wall Street will now work to rein them in. Instead, we need to look to the states for leadership.

New York State has the dubious honor of being the state with the highest income and wealth inequality in the country. We’re home to the executives artificially inflating their salaries and stock portfolios through buybacks, as well as the workers and families the companies have chosen to ignore. Importantly, we’re also home to the two largest stock exchanges in the world.

Billions of dollars are traded daily on the New York Stock Exchange, and a law has been on the books for over one hundred years to collect a small sales tax on every single share traded on all New York exchanges. Since 1981, however, that tax has been funneled right back into Wall Street in the form of a $14 billion rebate. A broad coalition of organizations, known as Strong Economy for All, has called on lawmakers in Albany to repeal the rebate and institute a targeted tax on stock buybacks through the state’s budgeting process. Unfortunately, this smart solution didn’t make it into the budget. Fortunately for New Yorkers, we have a second bite at the apple.

This legislative session, lawmakers in Albany should enact a targeted tax on stock buybacks—and keep the money rather than send it back to Wall Street. Not only would this small tax provide the state with much-needed revenue, but it would also make buybacks less attractive to corporate executives and incentivize investments in workers and innovation—investments that will create an economy that works for the many, not the wealthy and powerful few. Companies received their windfall, now it’s time to share the benefits.