The part of the Inflation Reduction Act that everybody missed

After Kyrsten Sinema rescued the grotesquely regressive carried interest loophole, the Senate slipped in a $73 billion tax on stock buybacks. It's long overdue.

The Inflation Reduction Act hasn’t even cleared the House yet (the vote is scheduled for Friday) and already inflation is zero! The Consumer Price Index did not rise in July, the Bureau of Labor Statistics reported yesterday. Gas prices fell so far that they offset increases in everything else. But since the “core inflation” rate (i.e., everything except volatile oil and food prices) remains 5.9 percent, and since gas prices will probably rise again, don’t put your vintage 1974 WIN button on Ebay just yet.

(Ironically, the one thing inflation hasn’t done much to jack up the price for is WIN buttons. Almost half a century later they sell for less than five bucks.)

Nobody minds when prices rise for stocks. Indeed, many of us are counting on it for our eventual retirement. But these days an increase in stock price doesn’t necessarily tell you anything about the value of the company you buy shares in. That’s because corporate America has been binging these past few years on stock buybacks, which automatically increase stock prices without altering one bit the real-world value of the company. (Fewer stocks = more earnings per share of the stocks that remain.)

Did I say stock buybacks don’t affect the value of a company? That’s not quite right. They may weaken its financial position. That’s because stock buybacks, increasingly, are funded with corporate debt. So when a stock’s price goes up, that may be because the chief executive put his company into hock to buy back stocks so that the stock options he mostly gets paid in will be worth more. This sort of stock manipulation and self-dealing was illegal until 1982, when Ronald Reagan’s Securities and Exchange Commission chairman, John Shad, changed the rules because Wall Street wanted to par-tay.

My latest New Republic piece is about the 1 percent excise tax on stock buybacks that the Senate put into the Inflation Reduction Act to replace revenue lost when Senator Kyrsten Sinema vetoed the de facto elimination of the carried interest loophole and watered down the 15 percent minimum corporate tax. One percent isn’t a lot, but it’s a start. The drunken corporate blowout on stock buybacks is outrageous, and maybe jacking up this tax in coming years will help.