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The Tax Foundation is the nation’s leading independent tax policy nonprofit. Since 1937, our principled research, insightful analysis, and engaged experts have informed smarter tax policy at the federal, state, and global levels. For over 80 years, our goal has remained the same: to improve lives through tax policies that lead to greater economic growth and opportunity.
The Tax Cuts and Jobs Act significantly reduced the federal corporate income tax rate. Reducing the tax encourages businesses to invest in the United States, fueling long-run economic growth. It also means companies will see an infusion of cash from their old investments. Companies are likely to share that infusion of cash with their shareholders, including through stock buybacks. Our recent paper reviews the economics of stock buybacks and explains that they do not displace long-term investment, and in some ways, even support it.
But, who are the shareholders of U.S. stocks standing to benefit from buybacks? While stock ownership is skewed toward higher-income households, many Americans access the U.S. stock market through employer-sponsored retirement plans, such as pension funds. We’ve created an interactive tool that shows how the top 1,000 retirement funds in the United States invest on behalf of employees, such as teachers, police officers, hospital workers, and others.
These pension funds, through investments in domestic equities, have a significant stake in the U.S. stock market, and thus have the potential to benefit from stock buybacks.
Our research is based on data made available by Pensions & Investments. We reviewed their data for the Top 1,000 pension funds in the United States.
Not every fund in the Pensions & Investments survey reported how they invested their assets. Within the survey, allocation was reported for 72 percent of defined benefit (DB) assets and 39 percent of defined contribution (DC) assets. To estimate the asset allocation of non-reporting plans to create the interactive tool, we assumed they had the same average as the plans that did report. The methodology below details the steps we took to apply reported averages to non-reporting plans.
First, the data was separated by different characteristics–sponsor type (corporate, public, union, or miscellaneous) and fund type (defined contribution or defined benefit)–for a total of eight categories. Asset allocation percentages were reported across 10 asset types for defined contribution plans and 10 asset types for defined benefit plans. To determine the average asset allocation for each of the eight categories, we completed the following steps:
