Carl Icahn, the iconic activist investor, has shifted, if only for today, his cross-hairs of contempt from the boardrooms of corporate America to the nation’s capital.
Icahn sends members of Congress a word of warning
Wednesday saw Carl Icahn warn several members of Congress a letter laying out his plans to form a super PAC with $150 million of his own money in an attempt to reform corporate tax reform. Specifically, Icahn spoke to the danger of inversions. Inversion is the process by which a company moves its headquarters overseas to take advantage of countries with considerably lower tax rates than the United States whose 35% is among the highest in the world. While taking advantage of deductions certainly lowers the corporate tax, but prior to deductions the United States’ corporate tax rate is the second-highest in the world “lagging” only behind Japan.
In recent years over 50 companies with a market value of over half a trillion dollars collectively, essentially U.S. companies, have used this inversion process to “cheat” the United States out of hundreds of millions of dollars and jobs.
“If this exodus is allowed to accelerate, there will be disastrous consequences for our already fragile economy, as well as meaningful and unnecessary job losses,” he said.
“I believe my own commitment of $150 million to the PAC will be more than enough to make voters fully aware of the horrible consequences that will ensue if Congress fails to pass legislation immediately to stop these ‘inversions,'” Icahn said.
Icahn calls for comprehensive repatriation of corporate overseas cash caches
While one can see why corporations would move overseas, it’s equally easy to see why they are hesitant to bring the money back to the States if only to face “double taxation”. Icahn believes the answer to this is a one-time repatriation tax of somewhere between 5% and 10%.
“These companies want to bring this money back to the United States, but they choose not to because we require they pay a “double tax” if they do,” Icahn said. “We are the only country in the world that does this, and it’s counterproductive because it creates an incentive to keep the money abroad.”
He’s not alone. Tim Cook, CEO of Apple, told Congress two years ago that a “single-digit” repatriation rate would prompt his company to bring foreign cash home.
And that would serve Icahn just fine personally as well as he owns “55 million shares or something” in Apple. If Apple could bring that money back it would likely allow the company to buyback its shares, something that Icahn has been pushing Apple and Cook to do more aggressively. An appreciation of just $3 per share of Apple would see Icahn getting his $150 million earmarked for the Super PAC back (plus some).
In addition to his $150 million, Icahn stated that he would look to raise additional funds from others but did not make it clear whether the super PAC would support individual candidates who shared his views on corporate tax reform .
Trump and Icahn as Treasury Secretary?
Icahn had hinted at forming this super PAC in September with The Wall Street Journal. Also last month, he released a 15-minute video warning the country that economic peril if not disaster was once again on the horizon and that an “activist” was needed in Washington. The underlying theme was that that person was Donald Trump. While no formal endorsement was made it was quite clear.
In the same talk with the Wall Street Journal he said that Trump was, “basically he’s by far the best of what I see out there.” This summer, Icahn also tweeted that he would accept the job of Treasury secretary if it was offered by an elected Trump who hinted that, if elected, Icahn could be Treasury secretary.
