> Boeing spent $43B on stock buybacks

I am very sympathetic to this line of criticism but I also find that "stock buybacks" are misunderstood and, as a result, overly demonized. So I just want to explain a few things for anyone who reads this.

The question with a corporation is what to do with surplus profits. The first iteration of this was to pay dividends. These legally are paid equally among shareholders. If you distribute $1B in profits and have 100M shares issued then each share gets a $10 dividend. Simple. Additionally, dividends had to be profits so corporate taxes were paid on those.

So there are two problems here:

1. Not every shareholder may want a dividend; and

2. The US tax treatment of dividends is bad, specifically double-taxing. as an example, the company may pay 15% corporate tax, pay a dividend with the remaining 85% and then the individual may 50% federal and state taxes on that, leading marginal tax rates of upwards of 60%, possibly higher.

(2) has led to some screwy legislation (eg passthrough corporation discounts) so solve what is otherwise a simple problem. Australia has completely solved this problem with so-called "franking credits". This means that $1B of profit is made, 30% taxes are paid and $700M is distributed but it comes with $300M in tax credits. So if you get a $700 dividend, you also get $300 credit with the ATO. If your marginal tax rate is higher than 30% is higher, you may have to pay a little more. If it's lower, you'll get a refund.

Now you generally can't borrow to pay dividends until you historically pay dividends. There are a lot of rules around this.

Enter share buybacks. This is where the company buys back its own stock on the open market. This reduces supply and hopefully raises the price for remaining shareholders.

Some will argue this is market manipulation but it really isn't. It's just a different way of distributin gmoney to shareholders. Unlike dividends, you can choose to take it or not by selling or not.

A share buyback has none of the dividend tax problems but it's even better. If you've held for 12+ months you're paying the long-term capital gains tax rate, which can be substantially lower than the marginal income tax rate.

But here's the big problem: it's completely fine to borrow money for a share buyback. This loophole needs to be closed.

Prior to the IRA and Trump tax cuts, it would work like this: you would leave profits overseas so you wouldn't have to pay corporate tax on them. You'd then borrow money used those overseas profits as collateral and do a share buyback. This should've been illegal. Or, in the very least, any borrowing against foreign profits should be treated by the IRS as repatriation of profits and thus tax is owed.

The Trump tax cuts changed how foreign profits are treated. The IRA further changed this with the 15% minimum tax, which was a very good change and one that didn't get a lot of attention.

Should a company pay out shareholders or pay its workers more? I absolutely favor the latter. But we shouldn't focus solely on share buybacks because that's a small part of the problem. I'd say what we need is:

1. A higher corporate tax rate;

2. An end to passthrough corporations;

3. End the double-taxing of dividends. Just do what Australia does;

4. All share buybacks have to come from profits only; and

5. An aggressive attack on profit-shifting / transfer pricing to offshore profits.