President Joe Biden’s 2023 budget plan includes additional funding to antitrust agencies and a tax increase on capital gains profits of the top .01%.
AP Photo/Alex Brandon
Paul Constant is a writer at Civic Ventures and the cohost of the “Pitchfork Economics” podcast.
He spoke with the Roosevelt Institute’s Niko Lusiani about proposals in Biden’s 2023 budget plan.
Lusiani says the restrictions on stock buybacks and tax increases on the .01% will aid economic growth.
This is an opinion column. The thoughts expressed are those of the author.
In his time in office, President Joe Biden has demonstrated his support for everyday Americans by backing labor unions, supporting a $15 minimum wage and implementing it for federal contractors, and calling for robust investments with his Bipartisan Infrastructure Law. Most recently, his 2023 budget plan offered several economic proposals that would do even more to reduce income inequality and invest in middle-out economic growth.
This week, Niko Lusiani, the director of corporate power at the Roosevelt Institute who leads the progressive think tank’s program to analyze corporate behavior, joined the “Pitchfork Economics” podcast to discuss what he considers three of the strongest policies in the 2023 Biden Budget proposal: a new rule on stock buybacks, more funding for antitrust regulation, and changes to the tax code.
1. Restricting corporate stock buybacks
First, Lusiani praised the budget’s call to “tackle the pernicious use of share buybacks,” which is when corporations buy back a large amount of stock from investors in order to intentionally elevate stock prices and earnings per share.
Stock buybacks reached a high last year, with companies spending a record $882 billion to repurchase shares from investors. Instead of companies putting profits back into their business by raising wages, expanding benefits, hiring more workers, or making other investments in their workforce, stock buybacks transfer profits away from workers and benefit only a small class of investors. And the C-suite executives that approve the buybacks are often incentivized to burn cash on buybacks because they’re paid based on earnings per share and other stock-related metrics.
Under President Biden’s proposed budget plan, corporate executives would be required to hold onto their stock for three years after a buyback, which “Pitchfork Economics” host Nick Hanauer said would have a cooling effect on stock buybacks by ensuring that CEOs wouldn’t be able to extract short-term profits at the expense of their companies.
This isn’t the first time the Biden administration has made a pass at limiting corporate stock buybacks: The ill-fated Build Back Better Act included a 1% tax on buyback profits.
2. Investing in antitrust agencies to break up monopoly power
Second, Lusiani praised the Biden budget’s extra $227 million in funding to the antitrust divisions of the DOJ and the FTC to break up monopolies.
The monopolization of American firms in monolithic corporations has helped create what President Biden called “capitalism without competition” — which in turns means a labor market without competition that would incentivize companies to attract and retain employees by offering higher wages, better benefits, more flexible workloads, and other worker protections and benefits.
But antitrust lawsuits are expensive, in part because large corporations can afford pricey legal teams and long, expensive court battles, which discourages pursuit from agencies like the DOJ and FTC.
“Those agencies are incredibly understaffed, and we need to build them up to be able to take on corporate power,” Lusiani said.
3. Raising taxes on the top .01%
Third, and perhaps the most transformative feature of the new budget, Lusiani said, is Biden’s proposed changes to the tax code that, per the administration’s slogan, promises to “Reward work, not wealth.”
President Biden’s budget proposes a 20% tax on both the income and capital gains profits of the top .01% — including on profits earned through unrealized appreciation, which is how many of the uber-rich build their wealth.
Centi-millionaires and billionaires don’t get biweekly paychecks the way most Americans do. Their wealth is in unrealized assets, which are stocks or other commodities that haven’t yet been sold for cash, and instead of selling those assets, they borrow against the unrealized gains — profits that haven’t yet been cashed out by selling the underlying asset — at low interest rates whenever they need cash, which allows their income to grow even while they’re spending it.
“So if you’re [Mark] Zuckerberg and Facebook stock jumps 20%, you’re going to pay the existing capital gains tax on that unrealized gain — even if you didn’t sell the stock,” Lusiani said.
For too long, Lusiani said, the tax code hasn’t reflected the reality of how wealthy people amass and store their wealth, which is why the wealthiest 400 American families pay a lower tax rate than the average taxpayer.
Balancing the federal tax code to ensure that the super-rich and wealthy corporations pay more in taxes is a fundamental piece of creating a more prosperous economy for everyone. It would also help fund programs — like the incredibly popular Child Tax Credit that Congress let expire — that deliver broad-based benefits to a majority of Americans and lead to economic growth from the middle out.
Despite the positive impact these proposals could have — and even though taxes on the wealthy poll exceptionally well — due to a hairline majority of Democrats in the Senate, Biden’s budget will likely not be approved by Congress this year.
Still, federal budgets are directional documents that signal the future of policy and lawmaking. By overtly calling out the ways that America’s wealthiest people amass and protect their fortunes, and by centering the American middle class in economic policy, Biden is potentially shifting the economic focus of Democratic politicians for years to come.
Economy, Nordic, Opinion, Economy, Paul Constant, Pitchfork Economics, Biden budget, Biden, Economic Policy, Taxes, Monopolies, Stock Buybacks, original contributor, contributor 2022, Laura Casado
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