WASHINGTON (dpa-AFX) - Accusing some corporations of putting shareholders and executives before workers, Senate Majority Leader Chuck Schumer, D-N.Y., and Senator Bernie Sanders, I-Vt., plan to introduce legislation putting restrictions on which companies can buy back stock.
Schumer and Sanders announced their plan in an op-ed published in the New York Times on Sunday, although the proposal is not likely to gain much traction in the Republican-controlled Senate.
The Democratic Senators said their legislation would prohibit a corporation from buying back its own stock unless it invests in workers and communities first.
The proposed requirements for a company to buy back stock include paying all workers at least $15 an hour, providing seven days of paid sick leave, and offering decent pensions and more reliable health benefits.
'In other words, our legislation would set minimum requirements for corporate investment in workers and the long-term strength of the company as a precondition for a corporation entering into a share buyback plan,' Schumer and Sanders wrote.
They added, 'The goal is to curtail the overreliance on buybacks while also incentivizing the productive investment of corporate capital.'
The plan to introduce the legislation comes after corporations repurchased a record $1 trillion of their own stock in 2018, fuel by the corporate tax cut Republicans pushed through Congress in late 2017.
Schumer and Sanders singled out Walmart (WMT), Harley Davidson (HOG) and Wells Fargo (WFC) for announcing major stock repurchases while also laying off thousands of workers.
'At a time of huge income and wealth inequality, Americans should be outraged that these profitable corporations are laying off workers while spending billions of dollars to boost their stock's value to further enrich the wealthy few,' Schumer and Sanders wrote.
The Senators added, 'If corporations continue to purchase their own stock at this rate, income disparities will continue to grow, productivity will suffer, the long-term strength of companies will diminish - and the American worker will fall further behind.'
Schumer and Sanders noted that corporations could shift to issuing larger dividends if Congress limits stock buybacks and suggested lawmakers should also seriously consider policies to limit the payout of dividends, perhaps through the tax code.
The proposal is likely to face substantial Republican resistance, however, with a top economic adviser to President Donald Trump calling the plan 'economically illiterate.'
'I wish some economist would go and talk to these guys on how buybacks work,' Kevin Hassett, chairman of the White House's Council of Economic Advisers, said on CNBC's 'Squawk Box' on Monday.
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