Carl Icahn Seeks to Rewrite U.S. Tax Laws
Carl Icahn may be a large shareholder of Apple Inc. (NASDAQ:AAPL), but there’s one big reason that he’s been unhappy with the company lately. Icahn is no stranger to going toe to toe with some of the largest companies in America. But the legendary billionaire investor is now setting his sights on reforming the U.S. economy. Before we dive into Icahn and the Apple stock price, it’s important to outline exactly what the investment guru and economic commentator is up to.
Carl Icahn Argues U.S. Economy Needs Tax Reform
Icahn released a letter on Wednesday indicating he will be forming a super PAC, funded by $150 million of his own money, in an effort to reform corporate taxes.
The billionaire investor stated that he will be focusing on “inversions.” These are when a company shifts its headquarters to outside the United States in order to position itself for lower tax rates.
Speaking on CNBC’s Fast Money: Halftime Report, Icahn mentioned that he believes reform can only come about through efforts at changing legislation in congress. (Source: “Carl Icahn: I want to see that something is done in Congress,” CNBC, October 21, 2015.) While Icahn did not specifically outline how he would be applying the $150 million, but only that he would be making sure that Congress is held accountable.
The current state of U.S. politics is utterly dysfunctional, says Icahn, and a corporate tax structure which encourages companies to keep money out of America is part of the problem.
He went on to say that up to 50 companies have moved out of the U.S. in the last several years, which altogether form about a half-trillion dollar loss in market value for this country. This has essentially cost taxpayers hundreds of millions in taxes and job losses.
Icahn in fact holds a significant share of Apple stock, a large American multinational firm which currently has over $100 billion outside of the United States. While Apple is certainly not going to be leaving the U.S., says Icahn, the fact that Washington is not working to bring some of that money into the country is disastrous.
Allowing this sort of flight out of the country will only accelerate the growing problems in the U.S. economy, says Icahn. The consequences of this process, left unchecked, could wreak havoc in the future. The already-fragile U.S. economy should be fighting to retain as many jobs as possible.
Icahn’s proposed reforms not only aim to bring back the company taxes but also reduce the incentive for their leaving the country in the first place.
This is of course not an unknown topic in Washington, as the Obama Administration has been quite vocal in advocating for economic patriotism in various forms. Tougher rules and regulations for those companies seeking to evade U.S. taxes have been proposed, but so far no actual legislation on the matter has been passed.
An important part of Icahn’s proposal is making it easier for multinational firms to bring cash back into the U.S. economy without fearing that it will be “double taxed,” usually referred to as repatriation. As evidence of the current tax structure’s lack of competitiveness, Icahn points at the more than $2.0 trillion worth of capital which American firms have parked outside the country.
As the only country which does this, the U.S. economy is losing out on a major flow of capital. Icahn contends that keeping up an antiquated and uncompetitive set of tax laws is maintaining an incentive to keep money out of America.
Here’s What Icahn’s Plan Means for Apple Stock
With huge multinational U.S. companies like Apple keeping their money outside of America, it’s no wonder that even veterans like Carl Icahn are worried about the state of the U.S. economy.
But if his proposed reforms to corporate taxes are successfully pushed through, there stands a good chance that Apple could bring back billions in otherwise lost revenue into the U.S economy, and other companies will follow suit. If and when that happens, Apple stockholders can expect a rush of dividends and share buybacks.