Senators Chuck Schumer (D-NY), Ron Wyden (D-OR), and Elizabeth Warren (D-MA) recently introduced legislation to raise the stock repurchase excise tax established in the Inflation Reduction Act of 2022. In a new insight, Director of Fiscal Policy Jordan Haring explains how the tax works and discusses the implications of the Stock Buyback Accountability Act of 2026.

Key points:

• The Stock Buyback Accountability Act of 2026 would quadruple the excise tax rate to four percent.
• Supporters argue that increasing the tax rate on stock repurchases would raise additional federal revenue and incentivize businesses to prioritize productive investments over stock buybacks, but this argument misrepresents the role stock repurchases play in capital markets and fails to acknowledge the significant distortions a higher tax rate would create.
• Quadrupling the tax rate could reduce economic efficiency, discourage productive investment, impair capital allocation, and weaken the means through which capital flows to its highest value uses.
• While the policy would generate additional revenue in the short run, it could come at the expense of productivity and economic growth in the long run.

Read the analysis.