(Bloomberg) -- The new 1% levy on stock buybacks in the US Senate’s tax and climate package isn’t slated to go into effect until 2023, which means that there could be a flurry of repurchases before the end of this year.

Senate Democrats aim to pass legislation containing the buyback tax as soon as Sunday, but that portion wouldn’t take effect until Jan. 1, 2023, according to the text of the bill released Saturday. That gives corporations nearly five months to plan any additional buybacks before the levy goes into effect.

The proposed measure levies a 1% excise tax on the value of corporate stock buybacks, which Democrats are hoping will slow their use because they produce capital gains but no immediate tax bills. The tax would also potentially shift some companies to opt instead for dividends, which are taxed when issued. A second tax provision in the bill calls for a 15% minimum levy on the profits that corporations report to their shareholders. 

Declines in financial markets have already fueled a surge in buybacks this year as many companies have opted to buy while share prices are low. At least $21 billion in fresh share repurchase programs have been unveiled in the first three days of August, with PayPal Inc. authorizing a new $15 billion buyback plan. 

Moderna Inc., Airbnb Inc. and Marriott International Inc. have also added to or unveiled new programs. That follows Chevron Corp., Charles Schwab Corp. and Exxon Mobil Corp. and others that did it the final week of July.

Senate Finance Committee Chairman Ron Wyden said that the goal of the buyback tax is to curb share repurchases and to encourage companies to invest in their businesses, rather than buying back shares to boost stock prices.  

“Unless you take some steps to check it, it’s never gonna get checked,” Wyden told reporters Saturday. “What’s wrong with reinvesting that in new equipment, for example, that could reduce carbon emissions?”

Wall Street analysts say the new levy isn’t necessarily fatal to buybacks once it goes into effect. That’s largely because the 1% rate isn’t high enough to deter a large portion of buybacks.

Buybacks were already on track to have a record year before the excise tax was poised to become law. They remain the largest source of demand for US equities, according to a Goldman Sachs Group Inc. report from earlier this year, which also predicted that S&P share repurchases would increase 12% in 2022 to reach $1 trillion.

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