Senate Minority Leader Chuck Schumer is backing legislation that would dramatically increase the federal tax on corporate stock buybacks, arguing that companies should invest more in workers and long-term growth instead of using profits to boost share prices.
The proposal, known as the Stock Buyback Accountability Act of 2026, is relatively short—just four pages—but its impact could be significant for publicly traded companies, investors and corporate executives.
What the bill would actually do
The centerpiece of the legislation is straightforward: it would increase the federal excise tax on corporate stock repurchases from 1% to 4%.
Stock buybacks occur when a company uses cash to purchase its own shares from investors. By reducing the number of shares outstanding, buybacks often increase earnings per share and can boost stock prices.
Under current law, a corporation that repurchases $1 billion worth of stock would generally owe a 1% excise tax, or about $10 million.
Under Schumer’s proposal, that same company would owe roughly $40 million instead.
For large corporations that routinely spend billions on buybacks each year, the increase would be substantial. A company repurchasing $10 billion in stock could face a tax bill of roughly $400 million rather than $100 million.
The bill would apply to stock repurchases occurring after enactment.
The lesser-known executive compensation provision
The most consequential part of the legislation may not be the tax increase itself.
Current law generally allows corporations to reduce their buyback tax liability by the value of stock they issue during the year. The rationale is that if a company buys back shares but also issues new shares, the net reduction in outstanding stock may be smaller.
Schumer’s bill narrows that benefit.
Specifically, corporations would no longer be allowed to use stock granted to highly compensated executives and certain highly paid service providers to offset their buyback tax obligations.
The restriction would apply to:
- Covered executives under federal tax law.
- Non-employee service providers receiving more than $1 million annually from the corporation.
In practical terms, the bill attempts to prevent companies from reducing buyback taxes by simultaneously awarding large stock packages to top executives.
Supporters would likely argue that this closes a loophole that allows corporations to claim they are issuing stock while concentrating those benefits among senior leadership.
Why supporters favor the proposal
Proponents of higher buyback taxes have long argued that corporations spend excessive amounts of cash rewarding shareholders instead of investing in workers, facilities, research or wage growth.
A higher tax could make buybacks less attractive relative to other uses of capital.
The executive compensation provision also reflects growing political scrutiny of stock-based pay packages. Critics argue that executives often have personal incentives to favor buybacks because higher share prices can increase the value of their compensation.
By increasing the cost of buybacks and limiting tax advantages tied to executive stock awards, supporters believe corporations would face greater pressure to deploy capital elsewhere.
The bill’s biggest shortcomings
The legislation is notable for what it does not do.
First, it does not prohibit buybacks or meaningfully limit them. A 4% tax may be large enough to generate additional federal revenue, but it is unlikely to stop companies from conducting buybacks if management believes the benefits outweigh the cost.
For many large corporations, a 4% tax remains a relatively small expense compared with the potential effect buybacks can have on earnings per share and shareholder returns.
The bill assumes companies will redirect money toward workers or investment rather than simply absorbing the higher tax cost. Nothing in the legislation requires additional spending on wages, manufacturing, research, hiring or capital projects.
Companies may respond by increasing dividends instead of repurchasing stock. The legislation targets one method of returning capital to shareholders but does not address alternatives.
Fourth, the executive compensation provision applies only to very highly compensated individuals. Companies could potentially restructure compensation arrangements in ways that reduce the bill’s intended impact while remaining compliant with the law.
The bill also does not directly address a broader criticism frequently raised by economists: that buybacks themselves are not inherently harmful. Many analysts view buybacks as a legitimate mechanism for returning excess capital to shareholders, particularly when companies lack attractive investment opportunities.
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