A group of Democratic and progressive lawmakers is urging the U.S. Department of Commerce to ban corporations that are receiving money from a recent congressional subsidy bill from conducting stock buybacks for at least a decade, as companies are increasingly using stock buybacks to enrich shareholders and executives amid high inflation.
In a letter sent to the Commerce CHIPS program office, the lawmakers said that, while last year’s CHIPS bill does contain some restrictions on stock buybacks, it doesn’t go far enough in stopping companies from carrying out stock buyback plans with the revenues boosted by the bill. They called for regulators to outright ban CHIPS recipients from engaging in stock buybacks for at least a decade.
In their letter, lawmakers urged the agency to “use its full authority to prevent CHIPS recipients from misusing taxpayer dollars by directly or indirectly funding buybacks and other shareholder distributions.”
“As several of us noted in our October 2022 letter to Secretary Raimondo, this is not a hypothetical risk. America’s largest semiconductor companies have spent hundreds of billions on stock buybacks in recent years,” the lawmakers continued, pointing out that five of the largest semiconductor manufacturers spent a collective nearly $250 billion on stock buybacks between 2011 and 2020.
The letter was signed by eight lawmakers, including Senators Elizabeth Warren (D-Massachusetts) and Bernie Sanders (I-Vermont) and Representatives Pramila Jayapal (D-Washington) and Jamaal Bowman (D-New York).
The CHIPS bill was passed last year to head off a computer chip shortage, and allocated nearly $80 billion in new spending to companies like Intel and IBM. The bill bars companies from using the CHIPS subsidies to directly fund stock buyback plans or dividends, but the lawmakers say that the funds could still be used indirectly to fund such plans.
“Absent strict limits, companies would, through accounting mischief, be able to flout the restrictions … and functionally use CHIPS funding for any purpose,” the lawmakers wrote. “For instance, without a blanket prohibition on stock buybacks, companies could accept a $100 million CHIPS grant from the federal government — and use the funds to construct a semiconductor facility, but immediately turn around and use $100 million of its own cash for stock buybacks — evading restrictions on CHIPS funding to enrich their stockholders with taxpayer funds.”
Commerce regulators have said that the agency will give preference to CHIPS applicants that have pledged not to engage in stock buybacks, but the lawmakers say that the agency has the authority to be far stricter in implementing the law.
Corporate practices of stock buybacks and dividends have come under high scrutiny in recent months, as fossil fuel companies and other corporations’ profits have soared due to corporate price hikes with inflation as a cover. These companies have turned around and, on the public’s dollar, used their record-high profits to massively inflate their stock buyback programs; Chevron, for instance, recorded a record profit for 2022 and tripled its stock buyback program to $75 billion, making it one of the largest stock buyback programs in history.
Stock buybacks are often not only a huge boon to executives — who are frequently compensated in stocks — but also to influential shareholders, who turn around and encourage companies to implement more stock buybacks in order to enrich themselves. Buybacks also allow shareholders to avoid paying taxes on their stock gains they would otherwise owe if they received a dividend or if they sold the stock.
Stock buybacks have become extremely widespread since Republicans passed their massive corporate tax giveaway bill in 2017. A recent report by the Institute on Taxation and Economic Policy (ITEP) found that, in the four years following the bill, S&P 500 companies collectively spent more on stock buybacks than they spent on capital expenditures, or expenses on fixed assets like buildings, software and equipment “that might have created new jobs and grown the economy,” as ITEP wrote.
President Joe Biden has proposed cracking down on stock buybacks. In his State of the Union address, Biden called for the 1 percent stock buyback tax, as passed in last year’s Inflation Reduction Act, to be increased to 4 percent.
We’re not backing down in the face of Trump’s threats.
As Donald Trump is inaugurated a second time, independent media organizations are faced with urgent mandates: Tell the truth more loudly than ever before. Do that work even as our standard modes of distribution (such as social media platforms) are being manipulated and curtailed by forces of fascist repression and ruthless capitalism. Do that work even as journalism and journalists face targeted attacks, including from the government itself. And do that work in community, never forgetting that we’re not shouting into a faceless void – we’re reaching out to real people amid a life-threatening political climate.
Our task is formidable, and it requires us to ground ourselves in our principles, remind ourselves of our utility, dig in and commit.
As a dizzying number of corporate news organizations – either through need or greed – rush to implement new ways to further monetize their content, and others acquiesce to Trump’s wishes, now is a time for movement media-makers to double down on community-first models.
At Truthout, we are reaffirming our commitments on this front: We won’t run ads or have a paywall because we believe that everyone should have access to information, and that access should exist without barriers and free of distractions from craven corporate interests. We recognize the implications for democracy when information-seekers click a link only to find the article trapped behind a paywall or buried on a page with dozens of invasive ads. The laws of capitalism dictate an unending increase in monetization, and much of the media simply follows those laws. Truthout and many of our peers are dedicating ourselves to following other paths – a commitment which feels vital in a moment when corporations are evermore overtly embedded in government.
Over 80 percent of Truthout‘s funding comes from small individual donations from our community of readers, and the remaining 20 percent comes from a handful of social justice-oriented foundations. Over a third of our total budget is supported by recurring monthly donors, many of whom give because they want to help us keep Truthout barrier-free for everyone.
You can help by giving today. Whether you can make a small monthly donation or a larger gift, Truthout only works with your support.