The big share buyback controversy

US politicians have share buybacks in their sights. They may be right to do so, says John Stepek – but not for the reason they think.

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Rubio aims to change buyback tax laws
(Image credit: 2018 Getty Images)

Share buybacks have always been controversial, but now they are rapidly turning into US public enemy number one. Last year, a record $1trn was earmarked by companies to buy their own stock, boosted by the $700bn or so that US companies brought back onshore after tax rates on repatriated profits were slashed. Politicians of all stripes have argued that this money should have been spent on boosting wages or investing in expansion. Republican senator Marco Rubio wants to change tax laws to make buybacks less appealing, while various Democrats have argued that buybacks are mainly aimed at boosting executive bonuses. So what's the fuss, and does it matter for investors?

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John Stepek

John Stepek is a senior reporter at Bloomberg News and a former editor of MoneyWeek magazine. He graduated from Strathclyde University with a degree in psychology in 1996 and has always been fascinated by the gap between the way the market works in theory and the way it works in practice, and by how our deep-rooted instincts work against our best interests as investors.

He started out in journalism by writing articles about the specific business challenges facing family firms. In 2003, he took a job on the finance desk of Teletext, where he spent two years covering the markets and breaking financial news.

His work has been published in Families in Business, Shares magazine, Spear's Magazine, The Sunday Times, and The Spectator among others. He has also appeared as an expert commentator on BBC Radio 4's Today programme, BBC Radio Scotland, Newsnight, Daily Politics and Bloomberg. His first book, on contrarian investing, The Sceptical Investor, was released in March 2019. You can follow John on Twitter at @john_stepek.