The Senate recently passed the Inflation Reduction Act of 2022. Major
components of the Act include spending on climate change, increased IRS
spending, and measures to lower the cost of prescription drugs. In order
to pass the Act, a last minute change to get the necessary votes was a 1 percent excise tax on stock repurchases.
As we showed in the text, dividends and stock repurchases affect a
company and investors in much the same way. The tax may push companies
toward dividends, although since the new tax wouldn't take effect until
2023, analysts are expecting large repurchases to be completed by the
end of 2022.
Wednesday, August 10, 2022
Stock Repurchase Tax
