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Corporate share repurchases and the 2023 excise tax

Author

Listed:
  • Autore, Don M.
  • Barnes, Spencer
  • Clarke, Nicholas
  • Schrowang, Andrew

Abstract

The Inflation Reduction Act of 2022 imposes a 1 % excise tax on US corporate share repurchases, effective January 1, 2023. The tax's implementation is associated with a significant decline in corporate repurchases that is not offset by a corresponding increase in dividends. Aggregate repurchases decline from about $1 trillion in 2022 to just over $800 billion in 2023, and the average firm reduces quarterly repurchases (as a fraction of market capitalization) by roughly 25 %. The decline in repurchases by US firms far exceeds a contemporaneous decline in repurchases by Canadian firms, is large in a historical context, and is not driven by firm fundamentals. Tax-induced cuts to repurchases are associated with an increase in cash but no increase in investment, implying that the tax has not generated the stated policy objective.

Suggested Citation

  • Autore, Don M. & Barnes, Spencer & Clarke, Nicholas & Schrowang, Andrew, 2025. "Corporate share repurchases and the 2023 excise tax," Journal of Corporate Finance, Elsevier, vol. 95(C).
    • Handle: RePEc:eee:corfin:v:95:y:2025:i:c:s092911992500149x
    DOI: 10.1016/j.jcorpfin.2025.102881
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