A new study from the National Taxpayers Union Foundation explains how an increase in stock buybacks following the passage of the Tax Cuts and Jobs Act is a good sign and proof of corporations reinvesting in their business due to the corporate rate cut. Critics of the buyback trend ignore the actual reason for stock buybacks and the economic impacts. and claim that this is a sign that corporations are the big winners from tax reform. Corporate buybacks are short-term examples of the success of tax reform, and employees and workers will be the real winners of the buyback trend.
“The benefits of the TCJA will be realized over the long term,” writes NTUF policy analyst and study author Andrew Wilford, “and dismissing tax reform as a failure because of an uptick in stock buybacks would be a mistake.”
Stock buybacks are simply another form of corporations investing back into their companies and the economy, due to provisions passed in the TCJA. This is a way for companies to make smarter investments by reinvesting in their own company and provide a path toward long-term growth for their business.
“Businesses reinvesting into their operations was a predictable result of tax reform,” Wilford said. “This is a positive development for workers, who will realize higher productivity, more job security and higher compensation as a result of this increased economic activity.”