BBs are a way for companies to return money to investors when they don't know what else to do with their cash.
That’s called a “dividend”. A dividend is taxed, however. I’ll leave the rest as an exercise for the reader.
What you want to do is create an artificial incentive for not returning the capital, which will lead to its suboptimal allocation.
I truly don’t know what to make of this comment. On the one hand, we are all being mansplained on how stock buy-backs works, yet not one mention of the word “dividend”.
Re:America's Growth Ponzi Scheme
by fennecfoxen on Monday May 18, 2020 @11:30AM
(#23223595)
> A dividend is taxed, however.
You know what else is taxed? When a company buys back stock, reducing the number of shares outstanding so that each share represents more of the ongoing business, thus sending its stock price higher. The tax on this is called a "capital gains tax," perhaps you've heard of it?
What you want to do is create an artificial incentive for not returning the capital, which will lead to its suboptimal allocation. Companies will either sit on their cash, or they will be putting it into projects they would otherwise not be doing.