The New York Times editorial positions have gotten so absurd that even the owners of The New York Times disregard them when it comes to deciding how to run their business.
On Feb. 8, 2023, the Times Company announced, "The Board of Directors also approved a new $250 million Class A share repurchase program."
That’s on top of a $150 million stock buyback program approved in February of 2022, for a total of $400 million the Times Company has authorized spending on buying back shares of its own stock.
A June 2020 staff editorial in the Times had denounced such stock buybacks as an example of how the "profound inequities of American life are the result of laws written at the behest of the wealthy."
The Times editorial faulted the Securities and Exchange Commission’s decision, in 1982, to allow such buybacks. Describing the practice as "a new way for corporations to shovel money to shareholders," the Times recommended that policymakers instead pursue "reversing the legalization of share buybacks."
The Times corporate board is going ahead and doing something that the Times editorial board wants to outlaw. President Biden, though, seems to be listening to the Times editorial’s point of view.
That's bad news for shareholders. Biden, in his February 7 State of the Union address, proposed to "quadruple the tax on corporate stock buybacks."
That tax didn’t even exist until Biden signed it into law in 2022, after it passed the Senate on a 51-50 vote as part of the laughably named Inflation Reduction Act (IRA).
The one percent tax is estimated by the Congressional Budget Act to raise $74 billion over ten years. The tax hasn’t even been in effect for a full year, and Biden is already trying to quadruple it, to four percent.
A White House fact sheet contends that "Stock buybacks enable corporations to funnel tax-advantaged payouts to wealthy and foreign investors, instead of paying dividends that shareholders are required to pay taxes on."
It further spins, "President Biden signed into law a surcharge on corporate stock buybacks, which reduces the differential tax treatment between buybacks and dividends and encourages businesses to invest in their growth and productivity as opposed to paying out corporate executives or funneling tax-preferred profits to foreign shareholders."
It's almost as if the White House is trying to discourage foreign investors from purchasing stock in American companies.
The thing about stock buybacks is that they offer all shareholders — foreign, domestic, wealthy, non-wealthy — an equal choice about whether to sell or to continue as owners, with an increased share of company earnings.
The chairman of Berkshire Hathaway, Warren Buffett — hardly a political partisan — made this point over a recent weekend in his annual letter to shareholders:
"Imagine, if you will, three fully-informed shareholders of a local auto dealership, one of whom manages the business. Imagine, further, that one of the passive owners wishes to sell his interest back to the company at a price attractive to the two continuing shareholders.
"When completed, has this transaction harmed anyone?
"Is the manager somehow favored over the continuing passive owners?
"Has the public been hurt?" Buffett asked.
The Sage of Omaha concluded:
"When you are told that all repurchases are harmful to shareholders or to the country, or particularly beneficial to CEOs, you are listening to either an economic illiterate or a silver-tongued demagogue (characters that are not mutually exclusive)."
Buffett is too cautious, or polite, to name President Joe Biden or Sen. Elizabeth Warren, D-Mass., another outspoken critic of stock buybacks, but his description fits both politicians.
One percent or four percent is just the beginning for Democrats in Congress.
For businesses that politicians take a dislike to, the stock buyback tax rate would soar even higher, if the Democrats get their way.
Last year, the Senate Finance Committee chairman, Sen. Ron Wyden, D-Ore., joined by Sens. Schumer, D-NY., Booker, D-N.J. Blumenthal, D-Conn., and others in the Senate economic-illiterate-silver-tongue-demagogue caucus, sponsored legislation that would impose a 25% tax on share repurchases by oil and gas companies.
Imagine how the liberals would react if Republicans proposed a personalized 25% tax on share buybacks by news media companies such as The New York Times or by another predominantly left-leaning industry, like, say, Hollywood, or Big Tech.
The caterwauling from the coastal elites would be audible all the way to Omaha.
One begins to suspect that what really irks the Biden-Wyden-Warren-Schumer Democrats is less the preferential treatment that stock buybacks get over dividends, and more the concept of private ownership, period.
To sustain soaring "Inflation Reduction Act" levels of government spending, the Democrats need to keep borrowing money; they want investors to put money into federal bonds rather than stocks.
Republicans looking for issues going into the 2024 campaign could do worse than "we’ll end the Biden administration’s war on shareholders."
Ira Stoll is the author of "Samuel Adams: A Life," and "JFK, Conservative." Read Ira Stoll's Reports — More Here.
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