Shades of FDR, and a betrayal from the putative right of center. Senator Marco Rubio (R, FL) wants Government to dictate to private enterprises what they must do with company profit.
The plan backed by Rubio encourages domestic investment by making full and immediate expensing permanent “as a way to discourage companies from pursuing share repurchases.”
Right move, wrong reason. Immediate expensing ought to be a permanent item in tax code reform on its own right. Delaying expensing or stringing it out is just another aspect of using our tax code for social engineering, which bastardizes our tax collections and distorts our market away from the most efficient use of our money—whether business money or personal. And that most efficient use might well include stock buybacks; that’s a business decision with which Government has no business interfering.
“Discourage” companies? That’s a fiction. What Government starts as “discouraging,” it very quickly converts to barring. Senate Minority Leader Chuck Schumer (D, NY) and Senator Bernie Sanders (I, VT) are pushing for precisely this sort barring of legislation,
to curtail the ability of companies to purchase stock buybacks[,]
and Rubio is just as enthusiastically joining with them on this. A report released by Rubio’s Small Business and Entrepreneurship Committee had this in it:
Cash spent on share repurchases is not cash spent on capital investment, though the degree to which a relationship exists may vary by sector and firm type[.]
That’s not strictly true. Money spent on buybacks is money not spent on that business‘ capital investment. But do Rubio, Schumer, and Sanders really think that money goes under the mattresses of those now ex-shareholders?
Of course that money does not. It goes into one of three places, each beneficial to our economy. One is investments in other companies, facilitating those companies’ capital investments.
Another is spending on consumer and business goods, which enhances market demand, which increases cash flow into those producers’ coffers—which facilitates their capital investments.
The third is savings. As anyone who didn’t sleep through their high school econ course knows, savings are banks’ and other lenders’ source of funds which they loan out—to businesses so they can carry out their capital investments.
Hence the need to let businesses make their own decisions without Government diktat. It’s disappointing that a nominally Republican Senator doesn’t understand any of this.