'It’s really the shareholder who will bear the burden' of the 1% tax on stock buybacks, says one tax expert.
If investors thought they were getting their legs in a volatile stock market, a new tax, climate and healthcare spending bill from Capitol Hill might have them trying again find their footing.
If the bill becomes law, investors may quickly spot some related outcomes. Look at the pop for solar power companies, electric vehicle makers and fuel cell companies on Monday, a day after Senate Democrats eked the bill through on a 51-50 vote. The Inflation Reduction Act’s 1% tax on stock buybacks Companies reward shareholders through stock buybacks and by paying dividends. The tax code treats the two outcomes differently. The investor who gets qualified or ordinary dividends has to pay taxes on the income. On qualified dividends, it would be a 15% tax that year for many people. That is, unless they own the stock in a tax-deferred account like a 401.
That could happen two ways, she explained. It might nudge corporations to issue more dividends instead of buybacks, which would keep the tax bill with investors. Or if companies proceed with a buyback, the repurchased amount is 99% of what it would have been because now companies need to pay the 1% cut for taxes, Matheson noted.But is a 1% tax enough to shift companies away from buybacks toward more dividends? Douglas Feldman has doubts.
As a result, at least 55 major corporations paid no corporate income tax in 2020, said researchers at the left-leaning Institute on Taxation and Economic Policy after they reviewed publicly-available financial disclosures. “Diminishing the value of their financial statements is going to be very costly” for the investors, big and small, who are trying to make investing decisions based on financial statements, McBride said. The added complexity may also end with uneven results, hitting some sectors harder than others.
Any dent on stock prices would be slight, according to a UBS note Monday. “The taxes would have a very minimal 1% drag on S&P 500 earnings per share, though some companies will be more affected than others,” the note said. Perhaps — but the usual dose of investing caution applies, said Feldman. Some of the bill’s winners are companies in the green energy sector, he said. It’s not necessarily a winning bet for investors to single out particular companies for stock purchases. That’s why people may want to consider ETF exposure to the whole sector instead, he said.
Australia Latest News, Australia Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
An inflation-neutral social spending bill is not an inflation reduction actThere's another universe where President Joe Biden signs his so-called Inflation Reduction Act into law, but in March 2021 — when inflation was 2.6%, rather than approaching double digits.
Read more »
Inflation Reduction Act Won't Curb Inflation ‘Over the Short Run,' Says EconomistFluctuating energy, food and housing prices are likelier to move the needle on inflation in the near term than any spending plan Congress passes, experts say.
Read more »
Businesses Voice Support For Climate Action In The Inflation Reduction ActJoan Michelson is a career coach, dynamic public speaker and host of the acclaimed podcast Electric Ladies of fascinating interviews with women innovators in energy, climate and sustainability, ESG. (formerly known as Green Connections Radio) joanmichelson or electricladiespodcast.com
Read more »
Senate enters 'Vote-a-rama' as the 'Inflation Reduction Act' comes closer to being passedIt includes the largest ever federal effort on climate change - close to $400 billion - hands Medicare the power to negotiate pharmaceutical prices and extends expiring subsidies that help 13 million people afford health insurance.
Read more »
Senate nears passage of Inflation Reduction Act after overnight debateThe package, a dwindled version of earlier multitrillion-dollar measures that Democrats failed to advance, has become a partisan battleground over inflation, gasoline prices and other issues that polls show are driving voters.
Read more »
Senate passes Inflation Reduction Act after all-night vote seriesBREAKING: The Senate has passed the Inflation Reduction Act along party lines following hours of debate and a flurry of amendments that stretched through Saturday night and into Sunday afternoon.
Read more »