Howard Silverblatt, the longtime senior index analyst for S&P Dow Jones Indices, had it right when he said that because the U.S. buyback tax had bipartisan support, there was a good possibility the 1% tax was “only the opening move.”

Indeed, President Joe Biden announced in the State of the Union address Tuesday night that he aimed to quadruple the excise tax on buybacks — which goes into effect this year — to 4%.

“Big corporations and the wealthy were some of the top targets in President Biden’s State of the Union speech,” said Mark Everson, vice chairman of alliantgroup and a former IRS commissioner. “Hitting stock repurchases strikes me as a proposal that may very well resonate enough to be enacted. It is more modest and less controversial than a wealth tax — and easy enough to understand — but also appeals to those who are wary of Wall Street and the influence of big business.”

According to Sliverblatt, some companies would likely start to shift some buyback spending to dividend payments if the tax on repurchases reaches just 2.5%. But that would still be returning profits to shareholders. A poll by CNBC found that over half (55%) of U.S. CFOs said a 2% stock buyback tax would cause their company to buy back fewer of their own shares.

Biden says taxing buybacks removes a “distortion” in the tax system between buybacks and dividends — the two major ways publicly held companies return profits to shareholders. Dividends are taxed as the investor’s income; buybacks aren’t taxed directly.

Discouraging the practice, the White House and some members of Congress believe, will force CFOs to allot the cash to “long-term investments” and spend on infrastructure, technology innovation, and, in the case of “Big Oil,” as Biden noted, domestic production.

As any CFO would argue, however, C-suites and boards of directors already consider these investments before buying back stock, or at least the smart ones do.

“Studies find that buybacks occur when growth opportunities are poor and when companies have excess capital,” wrote Alex Edmans of the London Business School in a 2019 paper. “So companies make investment decisions first and buy back stock out of surplus cash, rather than repurchasing shares first and investing only out of the scraps left over.”