WASHINGTON -- Billionaire activist investor Carl Icahn issued a $150 million threat to Congress on Wednesday: pass legislation slashing corporate tax rates or face the wrath of his new super PAC.
In a letter first sent to members of Congress and then posted on his public website, Icahn outlined his plan to pour millions of his own dollars into a super PAC for the express purpose of advancing legislation to lower corporate tax rates on overseas profits.
U.S. corporations are currently avoiding paying taxes on over $2 trillion stashed offshore. Icahn wants to let them bring that money home at a massive tax discount. Coincidentally, Icahn is one of the largest investors in Apple, which holds over $181 billion in profits overseas -- more than any other U.S. multinational corporation.
"I believe the time has come to also hold Senators and Congressmen accountable for the current gridlock in Congress that prevents important legislation from being passed," Icahn wrote. "This is why I'm currently preparing to form a Super PAC with an initial commitment of $150 million from me personally."
That "important legislation" refers to a bipartisan bill, proposed by Sens. Rob Portman (R-Ohio) and Chuck Schumer (D-N.Y.), to use the revenue raised by a one-time repatriation of overseas corporate profits at a very low tax rate to pay for long-term highway funding, while also permanently lowering the tax rate on overseas corporate profits.
"This really sums up what politics has come to be, which is an argument among billionaires," said Nick Nyhart, president and CEO of Every Voice Center, which advocates for campaign finance reform.
Icahn couched his support for corporate tax-cutting as a way to prevent further corporate "inversions." The latter controversial practice involves a U.S. company avoiding U.S. taxes by purchasing a foreign company and then transferring its main business operations to the foreign company. Big names like Medtronic and Burger King have already taken this path to much criticism.
There are many other ways to limit corporate inversions, including legislation proposed by House Democrats and Sen. Dick Durbin (D-Ill.), but these would not provide a windfall of tax relief for corporations.
Bob McIntyre, director of Citizens for Tax Justice, previously said about the Portman-Schumer bill, "The plan gives big multinationals new avenues for tax avoidance whether they report their income in the U.S. or shift profits to tax havens, which is truly a 'win-win’ for corporations seeking to avoid paying their fair share."
As public policy, a previous measure that let corporations bring home their overseas profits at a lower tax rate was a massive failure. The Bush administration's 2004 repatriation plan promised that corporations would reinvest those profits to create jobs in the United States. But the Senate Permanent Subcommittee on Investigations found in 2011 that those jobs did not materialize and that the companies repatriating most of the overseas profits actually expanded their efforts to avoid taxes and stash money overseas.
"There is no evidence that the previous repatriation tax giveaway put Americans to work, and substantial evidence that it instead grew executive paychecks, propped up stock prices, and drew more money and jobs offshore," said then-Sen. Carl Levin (D-Mich.), the head of the investigating committee, upon releasing its findings.
Efforts to pass another repatriation tax holiday continued despite those results. Now, Icahn is planning to put big money muscle behind the corporate lobbying.
His letter urging passage of the Portman-Schumer legislation comes with a warning.
"While I plan to raise third party funds, 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,'" he wrote.
Later in the letter, Icahn warned, "I have sent this letter to all the members of the House Ways and Means Committee and the Senate Finance Committee as well as the Majority and Minority Leaders of the Senate and the Speaker of the House. I hope to be able to speak with you shortly. I intend to make the letter public in the next few days. However, if you do not wish me to make public any conversations I have with you, I will respect those wishes."
The amount of money Icahn proposes to put behind his super PAC places him in rarefied company: Billionaires Charles and David Koch operate a political network that spends hundreds of millions of dollars on elections and legislative advocacy each election cycle. Billionaire Tom Steyer put $73 million into his super PAC in 2014 to support candidates backing efforts to deal with climate change. Billionaire Sheldon Adelson invested over $100 million into a variety of super PACs in 2012 to support Republicans.
What sets Icahn apart is his rather explicit linkage of support for a specific piece of legislation with an implicit threat that failure to act will lead to an electoral cost.
"People talk about how money talks, and this is pretty literally money talking," Nyhart said.