vtsnowedin wrote:Here is a question for the market experts here. At the state of the union Biden railed about Exxon's profits last year and it's and other companies stock buy back programs and proposed the extra tax on Buy backs be raised by a factor of four.
But here is the rub. Those that sell their Exxon shares back to Exxon have to pay capital gains tax on the net profit of the sale. For example suppose a big investor sold back 100,000 shares at the current $118/ share for $11,800,000. Part of that would be the original purchase and the rest gain (or loss) but let's assume the average re seller has made a 100% gain and doubled his money so $59,000,000 in gain. (I'm doing better then that at the moment but just hit it when it was down.) So a big investor is in the top Capital gains tax bracket of 20% so will pay $1.18 million in CGT.
Exxon is proposing to buy back 15 billion worth of stock this year so using the same assumptions as average the buy back will generate 150 million from the current 1% extra tax plus the sellers will pay 1.5 Billion in CGT.
I think that is a pretty "fair share" right there.
Edited to correct a misplaced decimal point.
1). Unlike a clear skill, like say, chess, I'm not sure about stock market "experts". Sure, there are PLENTY of people on the internet who will CLAIM expertise in almost anything, but likely the serious experts will be more like Warren Buffett and not be bragging much, if at all, in my opinion. (Of course, those wanting to sell their "expertise" will be the opposite, but I always ask: "If they're so damn good, WHY do they need to sell their expertise? Why not just grow massively rich with their gains?" (I have lots of experience and some overall moderate success, largely from being damn persistent, so I'll opine on buybacks and buyback taxes below, though I claim to be no "stock market expert" outside the area of stock options.)
2). What's the question? Unless I'm missing something, I didn't see a clear question in your post. I saw an opinion on a proposed additional tax.
3). I'll opine that stock buybacks, overall, aren't that big a deal, except maybe management trying to feather their own nest by growing the stock price. A great company should be able to either return money to shareholders in dividends over time, or find investments worthy of making with their excess cash, vs. buying stock to reduce the number of shares. I share that opinion, generally, with various great investors, including Warren Buffett.
4). I think that wealthy investors already pay PLENTY of taxes over time, given the reality of the death tax, and the proportion of total US federal income taxes the top 10 percent and the top 1 percent pay, and how little the bottom 50% pay in federal income taxes. But obviously, the left end of the political spectrum will likely tend to disagree with that opinion, tending to love to TAX profits, even as they tend to claim profits are evil.
Disclosure: I tend to be mostly right wing on financial issues and more left wing on social issues and thus consider myself a political moderate, and I vote by issue, not by party.
