Mark Cuban says companies should be taxed more for buying back their own shares

Business Insider

2 days ago

Mark Cuban wants to target a favorite weapon of American corporations: stock buybacks.
In an X post on Tuesday, the billionaire investor said raising the federal tax on the practice would push companies to reinvest in their businesses and hit wealthy shareholders — including himself — the hardest.
The "Shark Tank" star called it "a way to charge the biggest public companies more" while shifting incentives toward long-term growth.
Stock buybacks, also called share repurchases, happen when a company buys back its stock from investors, often reducing the number of shares in circulation.
This can boost earnings per share and, in turn, the stock price, benefiting remaining shareholders. Critics say the practice can prioritize short-term gains over long-term investment.
American companies bought back $166 billion in shares in July — the highest July total on record — bringing the year-to-date tally to $926 billion, surpassing the previous year-to-date record set in 2022 by $108 billion, per data from stock market research firm Birinyi Associates.
The US has had a 1% tax on stock repurchases on publicly traded corporations since the Inflation Reduction Act, which took effect on January 1, 2023.
Cuban said that a higher tax could encourage firms to use the cash to expand or pay dividends to shareholders, which he said would be tax-free for many Americans.
"Married households making under 94k pay no taxes on it," Cuban wrote. "If I own it. I pay full taxes."
In a follow-up X post, Cuban suggested exempting companies from the higher tax if they distributed repurchased shares to all employees, from interns to the CEO, based on each worker's share of total annual cash earnings.
He said this would be a "baby step" toward reducing income inequality and boosting workers' net worth.
A market correction could encourage more buybacks
Citi predicted in a March note that there would be $1 trillion in buybacks for the year, up 11% from about $900 billion in 2024.
The bank said market declines could spur more repurchases, as companies seize the chance to buy their shares at discounted levels.
Citi said large firms like Apple, Alphabet, Nvidia, Wells Fargo, and Visa repurchased roughly $190 billion in stock last year alone.
Citi's forecast came before a series of market warnings from Wall Street strategists.
Analysts at BTIG, Evercore ISI, Stifel, Morgan Stanley, and Wells Fargo have all flagged the potential for a correction in the S&P 500 in the coming months.
They cited stretched valuations, seasonal weakness in August and September, and uncertainty over tariffs' economic impact.
Some analysts say a pullback could prompt companies to buy back even more of their shares, as firms often use buybacks to support share prices when markets are under pressure.