1% buyback tax won’t have big impact

So say the folks in this article, claiming that the smallish 1% tax won’t have much of an impact on buyback activity. If it rose to 2-3% the impact would be noticeable they claim.

But that’s for most companies who seem to do buybacks no matter the stock price. I have a feeling the 1% tax would have more of an impact on WB and CM, who are obviously very price sensitive when doing buybacks.


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Note to Warren & Charlie

Re: How to avoid the 1% excise tax on buybacks

Starting in 2023, Berkshire can issue a stock dividend to all shareholders pro-rata to offset the decrease in number shares outstanding as a result of buybacks. So the net result comes to 0 and thus avoid the 1% (stupid) tax on buybacks. WSJ points out that 1% tax doesn’t apply to buybacks to offset dilution caused by stock option grants; so presumably it doesn’t apply if the total number of shares outstanding does not change.