If I had a billion dollars, I probably wouldn’t create a super PAC to fight tax inversion, but probably something that relates to sandwiches. Yeah, sandwiches are super cool. #LunchTimeThoughts
Last week billionaire investor Carl Icahn put in $150 million in creating a super PAC to fight corporate tax inversion. This is troubling if you’re wary about super PACs as we are. Here, let’s explain all of this with a quick Q and A.
So… who is this guy?
His name is Carl Icahn, he’s a well-known investor in the financial community and he’s using $150 million of his own cash to create a super PAC.
1/2 I am starting a Super PAC with my initial commitment of $150 million to help end the crippling dysfunction in Congress
— Carl Icahn (@Carl_C_Icahn) October 21, 2015
Ok that’s nice, but super PACs are created every day, why was this guy blowing up my social media feed last week?
Well, Icahn’s super PAC is essentially creating a super PAC that directly helps himself…
Ok, some context. Icahn, like many other investors in the US, worries that too many companies are setting up their headquarters overseas to evade higher tax rates. The problem is traditionally referred to as tax inversion and in a letter posted on his blog, he looks to gain attention of this problem through the creation of a super PAC.
Oh, that doesn’t sound that bad! Tax inversion is a big problem in the US, so why are you guys being so critical?
You’re right, tax inversion is a legitimate concern in the US, however how Icahn plans to fix it is a little… backwards, if not completely self-serving. Icahn’s plan revolves around his super PAC backing a bill that would provide massive tax breaks to corporations essentially slashing corporate taxes and creating a massive windfall for investors.
What bill is he exactly talking about then?
It’s a bill in Congress that was introduced by both Sens. Charles Schumer (New York) and Robert Portman (Ohio) to fund the Highway Fund. It was introduced earlier this summer. The aspect that Ichan is interested in is the idea that would give companies a one-time tax on overseas holdings – which is estimated at $2.2 trillion – and would continue with reduced tax rate (compared to the current corporate tax rate) on future foreign earnings. Essentially it would create a new revenue stream for the government, considering government gets nothing from the $2.2 trillion that is currently overseas.
Ok so why is all of this self-serving?
Because if this bill were to pass, even though it would be cheaper for companies to reinvest money into the US, it would also make it cheaper to pay dividends to shareholders. You know, shareholders like Icahn…
Yeah, those are our thoughts exactly. Though to be fair, we don’t know what Icahn’s true motives are in this specific case. He absolutely could be concerned about corporate tax inversion, but honestly that’s not the point here.
Then what is?
That super PACs are dangerous in American politics. Just one guy – like Icahn – can push legislation with super PACs by creating issue ads either championing a certain agenda or even attacking politicians that go against it. It’s still unclear how Icahn plans on using his super PAC, but just one person having that much clout just highlights the problem they have.
(Photo Credits: Carl Icahn’s Twitter Account, Google Images)