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Political Icahn

22 October 2015 By Daniel Indiviglio

Carl Icahn is taking $150 million of his profits from shareholder activism to the political realm. The investor wants to help American companies bring back some $2 trillion of overseas cash to fund infrastructure, and presumably their bottom lines. The idea makes sense, but a longer-term fix would be better than a temporary fiddle.

This isn’t Icahn’s first shift from corporate to government cage-rattling. Last year, the New Yorker worth $20 billion tried to influence politicians in Washington to release bailed-out quasi-public mortgage insurers Fannie Mae and Freddie Mac back into the wild, after he invested $51 million in their otherwise worthless common stock.

While that crusade targeted personal gain more than the public good, this time around his ambition would be broadly beneficial. Prominent leaders on both sides of the partisan divide agree that the U.S. corporate tax system is broken. That includes Uncle Sam’s messy treatment of overseas earnings. Icahn supports a bipartisan plan penned earlier this year that would repatriate the giant purse of cash trapped abroad. He wants it taxed at a rate between 5 percent and 10 percent – far lower than the 35 percent rate that money is being hoarded offshore to avoid.

The plan would fund up to $200 billion in new infrastructure spending. That’s a worthy cause, as the country could use better roads, bridges, airports and other foundational projects to improve commerce, raise productivity and create jobs. All those after-tax dollars coming back to America would boost domestic investment, too.

Icahn, whom Donald Trump has described as a supporter of his presidential bid, is making a huge bet with this new activist push. The $150 million injection would be the largest lump sum for a political fund, ever. Indeed, all 1,200 super PACs formed so far for the 2016 election have only gathered $300 million to date.

The investor, though, would be wise to eschew the short-termism critics so readily toss at Icahn and his hedge fund ilk. Freezing $2 trillion of foreign earnings would remove a key motivation for politicians to pursue comprehensive corporate tax reform. Lowering the rate, while eliminating exemptions, loopholes and other distortions, would be a far better outcome – and it’s one that $150 million and a bullhorn might usefully make happen.


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