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Expand chart
Data: Institute of International Finance; Chart: Naema Ahmed/Axios

The gap between corporate buybacks and dividends is the widest it has been in 18 years.

Why it matters: Share buybacks soared, while total dividend payouts remained stagnant in the wake of the 2017 tax cut — at a time when the way companies use their profits to return cash to shareholders is under attack from both sides of the aisle.

  • Companies are opting to buy back stock rather than up dividends for tax reasons. Dividends are taxed as ordinary income, while buybacks are taxed at the lower capital gains rate — according to according to Emre Tiftik and Paul Della Guardia, economists at the International Institute of Finance.
  • Sen. Marco Rubio (R-Fla.) wants to change this. Earlier this year, Rubio said he'll introduce legislation that would make buybacks and dividends taxed on equal footing. There are many questions about how this would work.

Between the lines: Companies' preference for buybacks over dividends also speaks to the lack of confidence that extra profits are here to stay. If they hike dividends now, companies want to be sure they can continue to honor those payouts for years to come.

  • The pace of buybacks has already slowed since the beginning of 2019, IIF said, "as the impact of U.S. tax reform fades."
  • As Axios' Felix Salmon noted last year, it's easier for companies to dial back share buybacks than it is for them to cut their dividend.

Bonus: Last year, companies spent more buying back their own stock than on capital expenditures for the first time since 2008, according to Citigroup.

  • Still, as Bloomberg points out, over the last decade spending on capital expenditures like buildings or new machinery hit $6 trillion, much more than the $5.1 trillion spent on buybacks.

Go deeper: Stock buybacks will be a hot-button 2020 issue

Go deeper

Updated 25 mins ago - Politics & Policy

Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Health: Ipsos poll: COVID trick-or-treat.
  2. World: Greece tightens coronavirus restrictions as Europe cases spike.
  3. Economy: Conference Board predicts economy won’t fully recover until late 2021.
  4. Education: Surge threatens to shut classrooms down again.
  5. Technology: Fully at-home rapid COVID test to move forward.
  6. Travel: CDC replaces COVID-19 cruise ban with less restrictive "conditional sailing order."

Trump's legacy is shaped by his narrow interests

Illustration: Annelise Capossela/Axios

President Trump's policy legacy is as much defined by what he's ignored as by what he's involved himself in.

The big picture: Over the past four years, Trump has interested himself in only a slim slice of the government he leads. Outside of trade, immigration, a personal war against the "Deep State" and the hot foreign policy issue of the moment, Trump has left many of his Cabinet secretaries to work without interruption, let alone direction.

Bryan Walsh, author of Future
4 hours ago - Technology

AI and automation are creating a hybrid workforce

Illustration: Annelise Capossela/Axios

AI and automation are receiving a boost during the coronavirus pandemic that in the short term is creating a new hybrid workforce rather than destroying jobs outright.

The big picture: While the forces of automation and AI will eliminate some jobs and create some new ones, the vast majority will remain but be dramatically changed. The challenge for employers will be ensuring workforces are ready for the effects of technology.