Thread by @marcorubio

The justification for corporate buybacks is company has no better investment available. This may be true for any company from time to time. But what does it say when it is true for many companies year after year?

1/9

Since 1980 have steady trend of corporate profits flowing back into financial markets & less of these profits invested in increasing productivity through innovation, technology, equipment etc. The result is not enough increase in productivity, growth or widespread prosperity 2/9

Why are profits not being invested into company or new companies? Because our economy driven by large & active investors who pressure for increase earnings per share.Investment pools that prefer safe returns over long term investment & executive compensation based on stock
3/9

This is evidenced by fact that over the last 4 years our largest corporations borrowed money in order to fund buybacks & dividends. This money they borrowed did nothing to make company more profitable or productive. And they have to pay interest on the money!

4/9

The argument buybacks are good because frees up $ to reinvest in other businesses growth isn’t backed up by the facts.

Over last 40 years money back to shareholders has tripled as a % of our GDP, but investment into business dropped by 20%.

5/9

I support free market over socialism b/c market better than govt at encouraging investment & innovation needed for widespread prosperity. But tax code discourages best aspect of free market by giving buybacks a deferral advantage over dividends or investment

6/9

The irony is many businesses,if they could make own choice, would rather reinvest profits in improving their product & improving workers’ skills than return it to shareholders.

See the arguments of respected corporate attorneys like Martin Lipton: dealbook.nytimes.com/2013/02/25/sha…

7/9

Right now don’t have a “free market”. We have tax code which engineers economy in favor of inflating prices of shares at the expense of future productivity & job creation. If we are going to use tax code to incentivize behavior, it should be investing in productivity & jobs

8/9

Will soon file bill making immediate expensing permanent & tax corporate buybacks same way as dividends. No tax advantage for buybacks over dividends. But we’re going to give permanent preference to investments that will drive the creation of jobs & increase in wages.

9/9