There's a Problem With Buybacks, But It's Not What Senators Think

6 Pages Posted: 29 May 2019 Last revised: 26 Sep 2019

See all articles by Daniel Jacob Hemel

Daniel Jacob Hemel

University of Chicago - Law School

Gregg D. Polsky

University of Georgia School of Law

Date Written: February 18, 2019

Abstract

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. This short article argues that, while this anti-buyback sentiment is misguided, there nevertheless are good tax policy arguments for reforming the tax treatment of buybacks. The article recommends adoption of a 1969 proposal made by Professor Marvin Chirelstein that would recharacterize (for tax purposes) buybacks as a pro rata cash dividend, followed by sales of shares from the shareholders who participate in the buyback to the shareholders who do not.

Keywords: buybacks, redemptions, share repurchases, corporate tax, corporate distributions, dividends

Suggested Citation

Hemel, Daniel Jacob and Polsky, Gregg D., There's a Problem With Buybacks, But It's Not What Senators Think (February 18, 2019). Tax Notes, February 18, 2019, Volume 162, Number 7, p. 765; University of Georgia School of Law Legal Studies Research Paper No. 2019-20; University of Chicago Coase-Sandor Institute for Law & Economics Research Paper No. 881. Available at SSRN: https://ssrn.com/abstract=3360569

Daniel Jacob Hemel

University of Chicago - Law School ( email )

1111 E. 60th St.
Chicago, IL 60637
United States

Gregg D. Polsky (Contact Author)

University of Georgia School of Law ( email )

225 Herty Drive
Athens, GA 30602
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
89
Abstract Views
501
rank
296,369
PlumX Metrics