Coase-Sandor Working Paper Series in Law and Economics

There’s a Problem with Buybacks, but It’s Not What Senators Think

Daniel J. Hemel
Gregg D. Polsky


In a deeply divided Washington, one of the few issues on which leading lawmakers on both sides of the aisle appear to agree is that corporations should be discouraged from buying back their stock from shareholders. Earlier this month, top-ranking Democratic Sen. Charles E. Schumer of New York, along with Vermont independent Sen. Bernie Sanders, unveiled the outline of a proposal that would bar companies from buying back their shares until they pay all workers at least $15 an hour and offer a suite of healthcare, sick leave, and retirement benefits. On February 12, Florida Republican Sen. Marco Rubio— who has criticized buybacks in the past — announced that he wants to change the tax treatment of buybacks as part of a plan to make U.S. industry more competitive. When everyone from the self-described Democratic socialist Sanders to the mainstream conservative Rubio sees buybacks as a bugaboo, one might think that there is a real policy problem here, and there is. But it’s a different problem than the one that the senators have seized upon. And if the senators solve it, that will likely be by accident.