Share buybacks under the excise tax
Share repurchases appear on 28 recent papers in the finance journals, and only one of all 35 buyback papers carries a tax keyword. The US has taxed buybacks at 1% since 2023, and a higher rate has been proposed. Did the tax move payouts to dividends, and did it change investment?
What prompted this
Since October 2025, 35 papers carry a share-repurchase or buyback keyword (29 in finance journals), with "share repurchases" on 28. Only one of them also carries a tax keyword. The literature on payout policy still mostly asks why firms buy back shares, not what a tax on it does.
Questions
- After the 1% excise tax, did firms shift from buybacks to dividends, or did buybacks simply continue?
- Did firms with large buyback programmes invest or hire more, as supporters of the tax claimed?
- Do the responses predict what a 4% rate would do?
Data that could help
Quarterly repurchase and dividend data (Compustat), announcement dates of buyback programmes, and firms' investment and employment.
Next step
Compare buybacks and dividends of US firms before and after 2023 with those of Canadian firms, which faced a 2% tax from 2024, and with firms in countries without such a tax.