February 26, 2026 1:41PM 

# Should Policy Restrict Share Buybacks? 

By [Jeffrey Miron](https://www.cato.org/people/jeffrey-miron) 

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Many politicians believe that corporate share buybacks create “perverse” incentives for firms to prioritize short-term investments over future ones. The 2022 Inflation Reduction Act [included a 1 percent tax](https://www.congress.gov/crs-product/R47397#:~:text=The%20law%20commonly%20known%20as%20the%20Inflation%20Reduction%20Act%20of%202022%20(P.L.%20117%2D169)%20includes%20a%201%25%20excise%20tax%20on%20stock%20repurchases%20by%20publicly%20traded%20corporations.) on all buybacks, and President Trump recently issued an [executive order](https://www.whitehouse.gov/fact-sheets/2026/01/fact-sheet-president-donald-j-trump-prioritizes-the-warfighter-in-defense-contracting/) to prohibit share buybacks for underperforming defense contractors.

[Recent research](https://www.cato.org/research-briefs-economic-policy/does-share-repurchase-legalization-really-harm-corporate), however, shows that

> legalizing share repurchases increased investment by 8.0–9.8 percent among public firms … \[and\] improved public companies’ access to equity capital.

Moreover, the firms receiving these investments

> tended to be younger, smaller, and higher-growth, and typically held less cash … suggest\[ing\] that legalizing share repurchases allowed capital to flow from cash-rich, mature firms to cash-needy firms with greater growth opportunities.

These results make sense: Shifting cash from firms that do not have immediate productive uses to firms that do is good for economic efficiency. Inhibiting this shift stifles corporate investment and growth.

*Cross-posted from* [*Substack*](https://jeffreymiron.substack.com/p/immigration-restrictions-cause-enforcement)*.*

##### Related Tags 

[Economics](https://www.cato.org/economics), [Regulation](https://www.cato.org/regulatory-studies) 

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