The Inflation Reduction Act that is poised for votes in the US Senate is far from perfect. A scaled-down version of the ambitious plans that President Joe Biden and Senate Budget Committee chair Bernie Sanders framed last summer as the “Build Back Better” agenda, it’s the latest step in the series of compromises that’s been referred to as “Build Back Smaller.”

Yet the $740 billion budget reconciliation package  worked out by Senate majority leader Chuck Schumer (D-N.Y.) and Senator Joe Manchin (D-W.Va.) has ambitions that ought not be underestimated—especially as it arrives at a point when many Democrats had given up hope on getting another omnibus bill enacted before the November midterm elections. As it stands now, according to Politico, the measure “would spend $369 billion on energy and climate change, extend Obamacare subsidies through 2024, direct Medicare to negotiate lower prices for prescription drugs and send an estimated $300 billion to deficit reduction. It would be funded, in part, by a 15 percent corporate minimum tax on big companies and increased IRS enforcement.”

And it looks as if it will include a 1 percent excise tax on stock buybacks, which is actually a very big deal. The tax, which would raise $73 billion for climate and health care initiatives, cracks down on some of the ugliest abuses by multinational corporations.

That, says Amy Hanauer, the executive director of the Institute on Taxation and Economic Policy and one of the nation’s leading advocates for fair and functional tax policies, is “a good thing.”

A very good thing. And for a lot of reasons.

Currently, as Joe Hughes, a federal policy analyst with ITEP explains:

Corporations can shift their profits to shareholders either by paying them stock dividends or by buying their own stocks, which increases the value of the stocks held by shareholders. Shareholders pay income tax on stock dividends, though often at lower rates than wages and salary income. Stock buybacks, on the other hand, result in capital gains (because they increase the value of the stocks) that may not be taxed for years and in many cases are never taxed at all.

The excise tax provision, which was added as part of negotiations that got Senator Kyrsten Sinema (D-Ariz.) on board as the 50th Democratic supporter for the measure, follows a plan outlined last year by Senate Democrats that “would tax stock buybacks in a way that is more comparable to how dividends are taxed,” notes ITEP. “Corporations would be required to pay a tax equal to 1 percent of their stock repurchases, ensuring that profits shifted to shareholders in this way are subject to some federal tax.”

Not enough federal tax, mind you. But this sort of excise tax is “excellent policy,” says Chuck Marr, who follows federal tax debates for the Center on Budget and Policy Priorities. And its excellence goes beyond the revenue benefits, explains Sarah Anderson, the global economy director and co-editor of Inequality.org, a project of the Institute for Policy Studies.

As Anderson and her colleagues note, “Two-thirds of low-wage corporations that cut worker pay in 2021 spent billions on stock buybacks.” For example, the home-improvement giant Lowes “spent $13 billion on share repurchases in 2021—enough to have given each of its 325,000 employees a $40,000 raise. Instead, its median pay fell 7.6 percent to $22,697.” Best Buy’s CEO “got a 30 percent pay raise after laying off 5,000 employees—part of a move to replace full-time with part-time workers,” adds Anderson, as she ticks off a long list of abuses.

An excise tax on stock buybacks only begins to address those abuses. But it is an important step in the right direction. The next step, says Anderson, should be executive action by President Biden to further restrict buybacks by federal contractors.