Trump’s ‘Revenge Tax’ Is Out; Now GOP Scrambles To Rescue His Signature Bill From A $100 Billion Hole – Financial Freedom Countdown

A controversial “revenge tax” targeting foreign investors has been pulled from President Trump’s sweeping “One Big, Beautiful Bill” after Treasury Secretary Scott Bessent urged lawmakers to abandon the measure in light of a new global tax agreement.

While its removal may ease investor concerns and avoid a chilling effect on foreign capital, it leaves Republicans scrambling to cover a sudden multi-billion-dollar budget shortfall in an already fragile tax and spending package.

What Is Section 899?

Tucked into Trump’s massive new spending bill was a little-known proposal; Section 899 that raised  alarm bells across Wall Street.

Dubbed the “revenge tax,” it targets foreign investors from countries that levy what the U.S. deems “unfair taxes” on American companies.

Section 899 allows the U.S. to raise taxes by 5% annually; up to 20%, on investors from nations with targeted tax policies.

That includes digital services taxes, undertaxed profit rules, and other levies mainly aimed at U.S. tech giants.

What Was the ‘Revenge Tax’ Proposed?

Section 899, known as the “revenge tax,” was crafted as a counterstrike against foreign governments imposing what Republicans called discriminatory taxes on U.S. companies; especially digital service taxes targeting tech giants like Google and Amazon.

The goal was to defend American businesses and sovereignty by hitting back at countries participating in a global minimum tax deal championed by President Biden.

Republicans viewed Biden’s OECD-G20 tax agreement; which requires multinationals to pay at least a 15% tax wherever they operate; as a direct threat to American firms and an overreach by the executive branch.

Republicans accused the Biden administration of overstepping its authority by negotiating the deal without input from Congress.

The revenge tax provision would have imposed steep levies on foreign investors and companies from nations that penalized U.S. firms under the agreement.

Who Could Have Been Impacted?

Foreign individuals, multinational firms, and sovereign wealth funds with holdings in the U.S. could all have faced steeper tax bills.

The policy was clearly designed to apply pressure; but investors feared collateral damage.

The Tax That Hits Close to Home

While framed as retaliation against foreign governments, Section 899 could ultimately hit U.S. markets.

Foreign investors currently hold more than $60 trillion in American assets.

If even a small portion of that was withdrawn, it could have triggered ripple effects.

Dividend and Rental Income Were at Risk

Unlike U.S. Treasuries, dividends, royalties, rental income could have faced up to 50% withholding under the new rules, depending on treaty status.

That could make U.S. equities and real estate far less attractive globally.

Why Wall Street Was Nervous

Analysts had warned that the measure could disrupt capital flows. Hedge funds, REITs, private equity, and even ordinary retail portfolios could see turbulence.

A Blow to Market Liquidity?

Wall Street said the provision is “written in a manner that could limit foreign investment to the U.S.”

Less foreign money means tighter liquidity and possibly lower asset prices; a scenario older investors know all too well.

Market Consequences Could Have Been Far-Reaching

The Joint Committee on Taxation estimated that while Section 899 might raise $116 billion over a decade, it could begin losing revenue after 2030 as foreign investment dries up.

That could pressure markets long-term.

History Repeating Itself?

Section 899 echoes a 1930s-era law, Section 891, which gave presidents the power to double taxes on countries overcharging Americans.

Back then, it was France. Today, it’s most of the developed world.

Capital Controls by Another Name?

Some analysts saw Section 899 as soft capital controls.

That’s raising red flags for investors who depend on open financial systems and stable rule of law.

The “Revenge Tax” appeared less to generate revenue and more to coerce global tax compliance.

International Backlash Was Brewing

Section 899 targeted countries aligned with the OECD’s global tax harmonization plan, including nearly every U.S. ally: Britain, Canada, Australia, Japan, the EU, and more.

“Revenge Tax” Could Have Hit Your Portfolio

If you held dividend-paying stocks, REITs, or royalty funds, Section 899 could have impacted valuation or income streams.

While interest income was expected to be protected, that carveout wasn’t ironclad. Capital gains was expected to be excluded.

Institutional Exit Risk

Pension funds, central banks, and sovereign wealth funds would have reconsidered U.S. exposure.

A sudden reallocation could spike volatility and reduce market depth; especially in sectors like real estate and infrastructure.

A Weak Dollar Complicates the Picture

As the dollar continues to soften, any measure that dissuades foreign investment could accelerate its decline.

That might boost exports but harm purchasing power and retirement income for dollar-based investors.

Republicans Wanted Foreign Countries to Blink First

Markets thrive on predictability.

Section 899 introduced a new kind of uncertainty: tax retaliation tied to diplomatic spats. That’s not the kind of risk most investors priced in.

House Ways and Means Republicans viewed the tax as a way to push foreign countries to adjust their tax policies before the new tax is imposed.

Chairman Jason Smith of the House Committee on Ways and Means said, “President Trump is putting America first and standing up for Americans against foreign governments who want to tax our workers and businesses unfairly, kill American jobs, and hand China an advantage. The One, Big, Beautiful Bill provides President Trump with retaliatory countermeasures to use, consistent with his day one Executive Order to protect our economy from foreign taxes that unfairly target American workers and businesses. These countermeasures are precise and specific.”

Treasury’s Deal With Global Leaders

Bessent urged Congress to drop the provision after securing what he described as a “joint understanding” among G7 countries.

In a post on X, he explained that the deal would shield U.S. companies from the most punitive aspects of the international tax pact.

According to Bessent, the agreement now gives the U.S. more leverage and stability without triggering retaliation from foreign governments.

“Based on this progress and understanding, I have asked the Senate and House to remove the Section 899 protective measure from consideration in the One, Big, Beautiful Bill. This understanding with our G7 partners provides greater certainty and stability for the global economy and will enhance growth and investment in the United States and beyond. I thank Senator Crapo and Chairman Smith for their leadership that made this day possible.,” Bessent stated.

GOP lawmakers complied, but they warned they’re prepared to reintroduce the tax if other nations fail to uphold their end of the agreement.

Biden’s Global Tax Deal Was a Flashpoint for “Revenge Tax”

Republicans have long criticized the Biden administration’s global tax deal as undermining U.S. sovereignty and bypassing Congress.

The agreement was crafted to stop multinationals from exploiting tax loopholes but came with controversial strings attached; allowing other countries to tax U.S. businesses if they weren’t paying enough at home.

This struck a nerve with conservative lawmakers, who saw the pact as an affront to American economic autonomy.

Trump’s “revenge tax” was created to ensure that the U.S. had a tool to push back; and its removal, though strategic, now leaves a void in both policy and funding.

Seniors May Feel the Fallout From the Missing Revenue

While dropping the tax may help avoid investor panic, it has real budget implications.

The Senate’s version of the provision was expected to raise $52 billion, with the House’s version potentially generating twice that. Now, with that revenue off the table, lawmakers must find new ways to fill the gap.

With ballooning deficits and rising debt, many seniors worry that essential programs like Social Security and Medicare could be caught in the crosshairs.

The GOP’s challenge to rebalance the bill has only intensified and Senate negotiations are getting more difficult. 

Keep an Eye on Senate Negotiations

Though the tax is off the table for now, Republican leaders say it could return.

“Congressional Republicans stand ready to take immediate action if the other parties walk away from this deal or slow walk its implementation,” said Senate Finance Chair Mike Crapo and House Ways and Means Chair Jason Smith in a joint statement.

A New Tax Provision Few Saw Coming

Although Section 899 was aimed at foreign governments; investors, including Americans with investment exposure, could have suffered if money were withdrawn.

Although the tax may be gone, the fight to protect seniors and savers at home by passing the “One Big Beautiful Bill” is far from finished.

Republicans have a slim majority to get the bill passed and the clock is ticking.

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