Until the mid-80s they were illegal except in a handful of unique cases. This is not just about div vs buyback taxes. Though there is no immediate mathematical economical benefit to the shareholders who remain, the markets have proven that the stock price will rise (and likely executive compensation) as a result of reduced sharecount vs the same demand (though possibly more demand as other companies engage in the same behavior).

Much of the gains in the stock market the past decade or so are simply the result of a greatly reduced number of shares available to purchase - as a result of buybacks, takeovers and going private (there are roughly 1/2 the number of listed companies today as in the 1990s).