xbzbanna

If the company made the money from selling beer, it was triple taxed due to the alcohol tax! Wait, if the customer paid for the beer with earned income, the beer was quadruple taxed. But if he paid for the beer with dividend income, it was quintuple taxed!

In the stepped-up basis case I mentioned, the investor may never pay taxes on the gains.

IMO, there's an injustice here when things like stepped-up basis result in these gains never being taxed, but that seems like a separate issue from the question of wages vs. profits.

To be explicit, there is a decision tree where a company can decide whether to have wages increase or profit, then decide what to do with the profit, and the rise of stock buybacks vs. dividends is an answer to the second question, not the first.

What do you find shocking about it? There is a big moral question about corporate profits vs. wages. But given that some portion of revenues become profits, they are either going to turn into a corporate cash hoard, dividends, or buybacks. I don't see anything shocking about choosing a buyback over the other two choices. After all, when a company takes investor money in a public offering, the idea is that the money will eventually be returned to investors, plus a profit if possible. A buyback is one way to close out the deal with some of those investors and return that money.

Edit:

Also, I think there's a bit of funny math here possibly contributing to a misunderstanding when the article says things like this:

> During that period those companies used 54% of their earnings—a total of $2.4 trillion—to buy back their own stock, almost all through purchases on the open market. Dividends absorbed an additional 37% of their earnings. That left very little for investments in productive capabilities or higher incomes for employees.

By definition, wages don't come out of profits. A company could increase wages by $1 billion, have $1 million profit, do a $1 million buyback, and then a journalist could write an article saying "company spends 100% of profit on buyback, giving none of it to workers."

In reality, many companies have a large cash hoard which is not going to employees or investors. Doing a buyback in those circumstances (notable recent examples include Apple and Facebook) doesn't have any effect on employee wages.

On the other hand, if one pension starts a trend, there might be big benefits to being first in. How do does one fit such outcomes into the volatility calculation...

Start with $1000 for a couch, $500 for a mattress. You're already halfway there.

It would generally be appropriate to say things like "was the best return" or "has been the best return" when describing past price appreciation. "Is the best return" could be reserved for something like a stable source of income.