[Congressional Record Volume 165, Number 98 (Wednesday, June 12, 2019)]
[Senate]
[Pages S3354-S3356]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]



                               Tax Reform

  Mr. BROWN. Mr. President, there are a lots of things we know about 
American workers today; that is, that workers understand that they are 
working harder than ever and have less to show for it. Productivity is 
up. Stock prices are soaring. Executive compensation has gone through 
the roof. Profits are up, but wages are largely flat. It is not

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a coincidence, not an accident of the market. It is not an inevitable 
result of capitalism that compensation for executives just vaults 
skyward, that profits are up, and that stock prices are up and wages 
are flat. Capitalism doesn't have to be that way. It is just the way it 
is now.
  Wall Street's laser focus on accumulated wealth for people who 
already have great wealth is by their explicit design. It comes at the 
direct expense of American workers. That is why I am laying out the 
case for how Wall Street undermines workers and some of the changes we 
need to make in this country to grow our middle class and make hard 
work pay off.
  Each installment of this series, what we are calling ``Wall Street's 
War on Workers,'' is posted on my media page. You can follow along at 
www.medium.com/@SenatorBrown.
  I have talked about how Wall Street's business model encourages 
companies to pay workers low wages and to lay off workers. It is the 
cost of doing business to minimize the expense of workers. Today I want 
to talk about how corporations use stock buybacks to withhold profits 
from workers who create them. The workers create this value, these 
profits and, instead, Wall Street and these corporations keep more and 
more profits for their CEOs and for Wall Street investors.
  Corporations focus on the short-term performance on the stock market, 
not the long-term success of their company and its workers. Their main 
goal becomes increasing stock prices quarter-to-quarter. That is how 
CEO's performances are evaluated. They are not thinking 10 years down 
the road. They are certainly not thinking of their country or community 
or even long-term of their company. They are thinking about stock 
prices quarter-to-quarter. That is how their performance is evaluated. 
They are compensated, in large part, with company shares.
  Increasingly, corporations juice those stock prices by repurchasing 
their own stock--what we call a stock buyback. Because there are a 
finite number of company shares at any given time, purchasing shares 
will decrease the number of shares available to investors and therefore 
drive up the value of the remaining shares. Existing stockholders will 
see their stock value increase. Lo and behold, who are those existing 
shareholders? Many of them owning great numbers of shares are--
shocking--the executives of the companies.

  They offer an even more attractive option to executives than 
dividends because buybacks are more flexible, and they aren't taxed 
until the shares are sold.
  Stock buybacks have been a way for companies to return cash to 
shareholders rather than investing in workers, rather than investing in 
new products since at least the 1980s, but since the past decade or so, 
the amount corporations are spending on buybacks has dramatically 
increased. Between 2010 and 2017, corporations spent more than $3 
trillion on stock buybacks. How much is that? Three trillion is 3,000 
billion.
  You all remember last year down this hall, as I pointed out before, 
where Senator McConnell works, the majority leader's office, lobbyists 
were going in and out of there writing the tax bill a year and a half 
ago. We had that discussion a number of times. Last year, following 
President Trump's tax giveaway to corporations, that tax bill that was 
written down the hall in the leader's office, 75 percent of the 
benefits of that tax bill went to the richest 1 percent.
  Last year, following President Trump's tax giveaway to corporations, 
companies spent $1.5 million every minute of every day on stock 
buybacks. Since that bill passed--that giveaway to the richest people 
in this country--companies have spent $1.5 million every minute of 
every day on stock buybacks.
  A couple of years ago, Home Depot spent 99 percent of its net-net 
income on stock buybacks; IBM spent 92 percent. Think about that--99 
percent and 92 percent of its income spent on stock buybacks. That is 
not money going to a $14-an-hour worker at that company. That is not 
money going to reinvest in equipment or building the company or 
research. Ninety-nine cents on the dollar is going to stock buybacks to 
enrich the biggest--not the small-time investors, to enrich the biggest 
investors. Companies are spending close to 100 percent of their profits 
on that--not on wages, not on other things.
  Do you know what? When all this was going on back when this tax bill 
was written--and I remember opening this door and pointing down the 
hall to Senator McConnell's office--around that time, President Trump 
invited some Senators of both parties to the White House. He promised 
us that every American would get at least a $4,000 raise; some would 
get a $9,000 raise. Do you know what happened? I know the President 
figured out he wasn't really telling the truth. He was doing his 
typical exaggeration.
  When he said every American would get a $4,000 pay increase, at 
least, that money didn't go to wage increases. In those two companies, 
more than 90 percent of it went to stock buybacks. It went to increases 
in salaries and wages but only to the top executives. Don't even try to 
tell us that these tax cuts for the rich trickle down to middle-income 
workers or trickle down to middle-income Americans. They simply don't.
  Buybacks jumped even more after President Trump signed that bill. 
More money was spent on stock buybacks in 2018 than on debt payment, 
capital expenditures, research and development, on dividends.
  Virtually almost every Republican voted for that tax bill. Don't try 
to come here, my friends on the other side of the aisle, and say we are 
going to vote for this huge tax cut for rich people--this bill written 
down the hall in Senator McConnell's office--we are going to vote for a 
bill to give big tax cuts to rich people, and that money is going to 
work its way down to help the middle class. Don't even bother trying to 
lie to us and tell us that. That never happens.
  Proponents of stock buybacks argue that companies purchase their own 
shares only after considering other value-creating investment options. 
There is not a lot of consideration of other options when more than 90 
cents on the dollar is spent on stock buybacks. They expect us to 
believe America is truly out of ideas. Are all our factories as updated 
as they can be? Are all workers earning a fair wage they can live on? 
Of course not.
  Talk to any family in Cleveland, where I live now; or Lorraine, where 
I lived before; Mansfield, where I grew up; or Chillicothe; or 
Marietta. Talk to anyone outside of Wall Street or the richest enclaves 
of this country. Ask these families if they can think of a better 
investment for the trillions of dollars in wealth American workers have 
created.
  It doesn't have to be this way. The Tax Code is one of the best tools 
we have to influence businesses. Tax reform should have been an 
opportunity for companies to encourage people to invest more in 
workers.
  When I went to the White House in that meeting with President Trump, 
I gave him a couple of ideas. I actually handed him legislation. I 
handed him the Patriot Corporation Act. Do you know what that bill 
does? It doesn't just give tax breaks to the big corporate lobbyists 
who come in and out of Senator McConnell's office. The Patriot 
Corporation Act says that if your company pays good wages, if your 
company provides decent benefits for health and retirement, if your 
company makes your product in the United States of America, you get a 
lower tax rate.
  A comparable bill, the freeloader fee bill, says that if you, on the 
other hand, are a company where a huge number of your workers receive 
Medicaid because you don't provide health insurance, a huge number of 
your workers get food stamps because you don't pay high enough wages, 
and a huge number of your workers get section 8 housing tax credits, 
you pay a corporate freeloader fee. That corporation is penalized.
  If the company does the right thing, they should have a lower tax 
break. If a company depends on American taxpayers to subsidize their 
low-wage employees, that company should be penalized. It is as simple 
as that.

  The President said he liked these ideas, but then the special 
interests came funneling into Senator McConnell's office, lining up out 
in the hall as far as you can see. They were going

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into the office petitioning, asking, begging, pleading for the majority 
leader to take care of them, and he did.
  If we started corporate tax reform with the Patriot Corporation Act, 
we would have seen rising wages. Instead, we see exploding stock 
buybacks. Again, we know why. Depending on the size of the companies, 
stocks can account for as much as half of an executive's compensation. 
An executives' personal interest influences decision making.
  One study of 2,500 companies found that the greater the percentage 
stock options in executive compensation packages, the more likely a 
company was to do stock buybacks. No kidding. If I am a CEO, and I see 
that my compensation depends on stock buybacks, I am going to maybe 
cash in and do stock buybacks. That is at least what we have seen.
  We shouldn't be surprised that when the President and Leader 
McConnell handed them a windfall, those executives turned around, 
plowed their money right back into stock buybacks and into their own 
pockets.
  A good example of that is really close to home for me. It is what 
happened to General Motors. General Motors pays almost no taxes anyway. 
It is a profitable corporation. Ten years ago, in this Senate, I was 
proud of what I did. I worked with Senator Voinovich, Republican from 
Ohio; I worked with President Bush, the second; and worked with 
President Obama in saving those two plant companies, Chrysler and GM. 
It meant that a lot of Ohioans and a lot of people around the country 
continued to have decent jobs.
  What happened 10 years later? They closed their plants. They do major 
stock buybacks. The executives get richer, and because of this Trump 
tax law, more production goes to Mexico.
  How do we stop this never-ending cycle of corporate greed and make 
sure the workers share the profits they created? It may not seem like 
it, but there are already regulations in place to prevent stock price 
manipulation.
  The problem is, the SEC rule put in place in 1982 has big loopholes. 
We need to strengthen the SEC rules to ban buybacks and provide more 
transparency.
  Some have suggested we ban buybacks altogether. That might sound 
good, but it will not do anything to put that money in the pockets of 
workers where it belongs. The goal is not to tax the rich. The goal is 
to quit giving them tax breaks, and the goal is to plow money into the 
middle class, to help American workers get their fair share, to help 
American workers share in the wealth they create for corporate America.
  My proposal is simple. If corporations want to transfer wealth to 
Wall Street, workers simply get a proportionate share of the pie. For 
every $1 million passed on to shareholders in the form of stock 
buybacks or dividends, corporations will have to pass on $1 to every 
worker in that company. I am calling it a worker dividend, and all 
public corporations would be required to pay it.
  I will be introducing legislation to strengthen SEC rules and to 
establish the worker dividend in the coming weeks. It simply comes back 
to the dignity of work. We should honor work. We should respect work. 
It means better wages. It means retirement benefits. It means 
healthcare. It means more control over your work schedule. It means a 
safe workplace. It means childcare. It means all the values that we 
appreciate as Americans. With the dignity of work and respecting and 
honoring work, we would see a worker dividend.
  Wall Street so often doesn't recognize that all work has dignity. 
Whether you swipe a badge or punch a clock, whether you work for tips, 
whether you work on salary, whether you are caring for an aging parent, 
whether you are raising your children, all work has dignity. Dr. King 
said there is no job that is menial if it has adequate compensation.
  Wall Street considers shareholders' equity in a company to be all 
that matters. Workers have equity in a company too. It is called sweat 
equity. For the first time in years in this country, it is time that 
workers are rewarded for their work.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Oklahoma.