In the US Senate tax and climate package, a new 1 per cent tax on share buybacks will not take effect until 2023, meaning a series of buybacks are likely by the end of the year. Senate Democrats plan to pass legislation that includes a repo tax as early as Sunday, but it won't take effect until January 1, 2023, according to a text of the bill released on Saturday. This gives companies nearly five months to plan any additional buybacks before the tax takes effect.

The proposal imposes a 1% consumption tax on the value of a company's share buybacks, which Democrats hope will slow its use because buybacks generate capital gains but no immediate taxes. The tax may also cause some companies to choose dividends instead. The second tax provision in the bill requires a minimum tax of 15% on profits reported by companies to shareholders.

The fall in financial markets has contributed to a surge in share buybacks this year, as many companies choose to buy shares when share prices are low. In the first three days of August, at least $21 billion of new share buyback plans have been announced, of which$PayPal Holdings Inc (PYPL.US) $A new buyback plan of $15 billion was approved.$Moderna Inc (MRNA.US) $, Airbnb (ABNB.US) and Marriott International (MAR.US) have also added or launched new buybacks. Earlier, companies such as CVX.US and XOM.US also bought back shares in the last week of July.

Ron Wyden, chairman of the Senate Finance Committee, said the goal of the buyback tax is to curb share buybacks and encourage companies to invest in their own businesses, not to boost share prices through share buybacks.

However, Wall Street analysts say that once the new tax takes effect, it may not be fatal to share buybacks. This is mainly because the interest rate of 1% is not high enough to stop a large number of buybacks. Share buybacks are expected to hit a record before the repurchase tax is about to become law. Buybacks remain the largest source of demand for the US stock market, according to a report by Goldman Sachs Group Group earlier this year, which also predicts that S & P's share buybacks will increase by 12 per cent to $1,000bn by 2022.