This bill — the Worker Dividend Act — would require corporations which use profits for stock buybacks to pay out a commensurate amount in bonuses to all of its employees. Bonuses would have to be equal in size for all employees (prorated for less than full-time workers), and paid out within 60 days of the end of the tax year unless the corporation chooses to increase regular compensation by that amount for one year. If a corporation fails to make such payments to employees, it would be required to pay a tax equal to the lesser of the amount of buybacks, or 50 percent of profits beyond $250 million.
What is Senate Bill S. 2505?
Cost of Senate Bill S. 2505
In-Depth: Sponsoring Sen. Cory Booker (D-NJ) introduced this bill to require corporations to pay out bonuses equal in value to any share buybacks it undertakes:
“Today, a culture of ‘short-termism’ pervades industry and financial markets, as companies prioritize short-run returns to investors and executives over investments in workers, like higher wages and expanded training, which pay off over the long run… Indicative of this trend is the massive wave of stock buybacks, in which companies are using their profits to benefit wealthy investors, as opposed to reinvesting those profits in their workers, in the form of raises. Our bill would mitigate this disturbing trend by ensuring that if a company has the profits to reward its shareholders, it must also reward the very people that help the company prosper — its workers.”
A column in the Financial Times’ Alphaville took issue with this bill, raising questions about whether low-income workers would benefit if they’re employed as contractors by subsidiaries rather than directly by parent corporations. It also pointed to conflicting research on the efficacy of share buybacks and suggested an alternative to the bill:
“In any event, government policies meant to impose high standards for corporate governance would limit the shareholder-value-destroying types of buybacks and encourage the types that create value. One place to start could be corporate boards — while they are required to sign off on the specific dividend amounts and schedules, the same standards do not hold for share buybacks. Subjecting buybacks to the same amount of board scrutiny as dividends may not sound as exciting as Booker’s “Worker Dividend Act”, but it sure does sound like a common-sense approach.”
This legislation has the support of one cosponsor, Sen. Bob Casey (D-PA).
Summary by Eric Revell(Photo Credit: Doloves / iStock)
Worker Dividend Act of 2018
A bill to amend the Internal Revenue Code of 1986 to ensure that workers and communities that are responsible for record corporate profits benefit from the wealth that those workers and communities help to create, and for other purposes.
- Not enactedThe President has not signed this bill
- The house has not voted
- The senate has not voted
Committee on FinanceIntroducedMarch 6th, 2018
- senate Committees