Inflation Reduction Act Putting Middle Class Families First, Ensuring Wall Street and Corporations Pay Their Fair Share

Press Release

U.S. Senator Sherrod Brown (D-OH), has long advocated for real investment in Ohio workers rather than shareholder giveaways on Wall Street. Last week, President Biden signed into law the Inflation Reduction Act of 2022, which takes dramatic steps to make our tax system work better for middle class and working class families, and to ensure multinational corporations pay their fair share. It includes legislation based off of Brown's Stock Buyback Accountability Act, and will impose a 1 percent excise tax on corporate stock buybacks.

"Big corporations should never pay less in taxes than middle class families. The Inflation Reduction Act will make corporations and Wall Street pay more of their fair share, and takes the first step to rein in Wall Street stock buybacks in decades," said Brown. "Corporations are raising prices to pad their profits and reward executives. It's time they did their part to lower costs, and invest in the people who make our economy work."

Stock buybacks were nearly banned due to the market-manipulation risk they presented until 1982. There have been serious concerns about corporations using stock buybacks to inflate their stock prices, particularly when corporate insiders have significant amounts of stock-based compensation themselves.

After the 2017 Republican tax law, instead of higher job growth or a gross domestic product surge, corporations spent hundreds of billions of dollars buying back their own stock. The big winners were rich shareholders, CEOs, and foreign entities, not American workers.

The Inflation Reduction Act stock buyback provisions will specifically:

For the first time, impose a 1 percent excise tax on corporate stock buybacks, based on Brown's Stock Buyback Accountability Act. The 2017 tax law delivered a massive tax windfall to wealthy corporations. A record number of stock buybacks followed, which enriched shareholders and CEOs instead of creating new jobs or raising workers' wages. To curb this trend, the bill requires corporations to pay a tax on the total amount of stock repurchase.
The Washington Post called this "the first new corporate taxes in a generation."
Two economists called the stock buyback provision "good for just about everyone, including employees and shareholders as well as overpaid CEOs," in the Wall Street Journal.
Require the largest corporations to pay a minimum tax. This minimum tax applies to companies with more than $1 billion in profits -- meaning only the approximately 200 largest corporations will be affected. These companies use tax loopholes to avoid paying the statutory 21 percent rate and actually pay well below 15 percent.
A recent study found that at least 55 of the largest corporations paid $0 in federal taxes on their profits in 2020.
Another recent government report found that the average tax rate on U.S. corporations is just 7.8 percent -- far less than the rate most workers pay on their wages.
Invest in job creation and industrial policy without raising middle class and working class taxes. The Inflation Reduction Act contains no new taxes on Ohio families, and will ensure that the vast majority of Americans who get their income from a paycheck, not a stock portfolio, carry less of the tax burden. It accomplishes that through taxing stock buybacks, closing loopholes, and going after corporations and wealthy tax cheats that have broken the law and gotten away with paying fewer taxes than many Ohio families.
Treasury Secretary Janet Yellen sent a letter to IRS Commissioner Charles Rettig directing the IRS not to use new resources in the Inflation Reduction Act to increase audits on Americans making less than $400,000 a year, and to instead prioritize corporations and wealthy tax cheats.

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