President Biden’s 2023 Budget Plan Will Put the Lid on Stock Buybacks

US President Biden is delivering a speech wearing blue business suit with American flags in the background

Last year, President Joe Biden forwarded his Build Back Better bill which, among other points, included taxing American companies. The framework suggested placing a 15% minimum tax on American companies which had collected over $1 billion in profits. The plan added a 1% surcharge for every repurchase announced by these companies. The objective of Biden’s plan was to raise the economy as a whole instead of letting companies raise their revenues and capitalization. 

But the bill was halted when it did not receive enough votes in the Senate. Now, on March 28, 2022, the US President released the Budget of the US Government for Fiscal Year 2023.

Curbing the Buyback Rage

Biden’s plan for the coming year is a slight reflection of his Build Back Better bill. The said budget bars company executives from selling shares post a company buyback. Additionally, executives can not sell shares they receive for years after. The plan did not give a number for the minimum years executives will have to hold the stock.

Biden’s statement on the plan included the words, “We spent less money than the last Administration and got better results… My budget will continue that progress, further reducing the deficit by continuing to support the economic growth that has increased revenues and ensuring that billionaires and large corporations pay their fair share.

With this plan, the President intends to distribute wealth, boosting the economy and the company’s own prospects instead of filling the pockets of executives running the company.

Record Number of Repurchases

Previously, towards the end of 2021, analysts at 2iQ covered the buyback trends that arose in 2021. As of 2022, the number of buybacks being announced daily has risen significantly

According to news from March 27, 2022, there has been a whopping increase in buybacks since the beginning of 2022. It was reported that up to $319 Billion worth of buybacks had already been commenced in 2022, while the first quarter has not yet ended.

As per 2iQ’s data, the number of buybacks by companies listed in the S&P 500 rose as 2021 went on. The first quarter of 2021 saw companies commence buybacks worth a net value of $167.3 B alone. In the fourth quarter, repurchases of almost $278.2 billion worth were made

Amounts and value of shares completed by US companies in the past year shown as a comparison of each quarter

For the ongoing quarter of 2022, buybacks of $19.6 billion value have already been completed so far, with the net number of shares traded standing currently at 127 million. Some of the most known buybacks this year were also covered by 2iQ, including S&P Global Inc (SPGI: US), Amazon.com Inc (AMZN: US), and Avis Budget Group (CAR: US)

Biden’s plan is still in discussion presently; it can only be implemented if the House of Representatives and Senate see it through. In a way, this plan is one of many attempts by the President to tackle inflation. But only time will tell if this will be a worthy advancement.

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