The top Democrat on the Senate Banking Committee is pushing a bill that would force U.S. companies to pay $1 to every worker for each $1 million they spend on stock buybacks that benefit shareholders and, typically, top executives.
“Workers have equity in companies, too: sweat equity,” Sen. Sherrod Brown of Ohio said in a Wednesday news briefing at the National Press Club. “And it’s time they’re rewarded for it.”
The proposal from a lawmaker who considered a presidential run is likely to add fodder to the 2020 campaign, where Democratic contenders have pushed policies from forgiving $1.6 trillion in student loan debt to raising the minimum wage to $15. It addresses an ongoing criticism from members of Congress, particularly Democrats, that corporations benefiting from government largesse during the financial crisis and double-digit tax cuts in 2017 funneled the money into stock buybacks and dividend payments rather than hiring and expansion.
What Brown refers to as a “worker dividend” would help differentiate Democrats from Republicans, he said, by showing their commitment to middle- and low-level employees.
President Trump and Senate Majority Leader Mitch McConnell have governed in a way that suggests they think the U.S. “can’t give enough to rich people,” Brown said. “Our society doesn’t necessarily think that way. Workers have been squeezed. Workers are more and more productive and their wages are flat.”
GOP lawmakers, however, have argued that loosening regulations and allowing businesses to keep more of their profits through a tax overhaul that lowered the top corporate rate to 21% from 35% would buoy the economy through investments and pay raises. Companies from JPMorgan Chase to Bank of America and pharmacy chain CVS boosted salaries and awarded one-time bonuses in the aftermath of the tax cuts.
Far from simply rewarding insiders, stock buybacks invest money more efficiently, business leaders say. When companies are generating large amounts of cash and don’t see high-return opportunities for new plants or products, they return it to investors who might.
Brown’s bill “is similar to failed policies of the past that have cut off hope, opportunity and innovation for American workers and Main Street business owners,” said Tom Quaadman, executive vice president of the U.S. Chamber of Commerce’s center for capital market competitiveness. “We are happy to work with policymakers from both parties to develop policies that promote growth and opportunity.”
In 2018, companies in the S&P 500, a widely followed gauge of U.S. financial markets, spent a record $806 billion on stock buybacks, according to S&P Dow Jones Indices.
“The rate of buybacks where executives continue to take more and more for themselves is an attack on the social fabric of our country,” Brown said. “It has all kinds of potential for upheaval in our economy, for civil order, for all those kinds of things. People feel increasingly that the system is rigged against them, and stock buybacks are one of the most in-your-face examples.”
