WASHINGTON: Congressional Republicans agreed to remove the so-called revenge tax provision from President Donald Trump’s big bill Thursday after Treasury Secretary Scott Bessent asked members of Congress to do so earlier in the day.
The Section 899 provision would allow the federal government to impose taxes on companies with foreign owners, as well as investors from countries judged as charging “unfair foreign taxes” on US companies.
The measure was expected to lead many companies to avoid investing in the US out of concern that they could face steep taxes.
Bessent said in an X post that he made the request to lawmakers after reaching an agreement with other countries on the Organization for Economic Co-operation and Development Global Tax Deal. He said that after “months of productive dialogue,” they would “announce a joint understanding among G7 countries that defends American interests.”
After he made the request, Senate Finance Committee Chairman Mike Crapo, R-Idaho, and House Ways and Means Committee Chairman Jason Smith, R-Missouri, said “we will remove proposed tax code Section 899” from the bill and “Congressional Republicans stand ready to take immediate action if the other parties walk away from this deal or slow walk its implementation.”
The removal of the provision will provide “greater certainty and stability for the global economy and will enhance growth and investment in the United States and beyond,” Bessent said in his post.
An analysis by the Global Business Alliance, a trade group representing international companies such as Toyota and Nestlé, estimates that the provision would cost the US 700,000 jobs and $100 billion annually in lost gross domestic product.
Global Business Alliance infographic. (X: @GlobalBiz)
The Global Business Alliance was among several groups that signed a letter addressed to Senate Majority Leader John Thune of South Dakota and Senate Finance Committee Chairman Mike Crapo of Idaho, warning of the consequences of Section 899.
The removal of the provision adds a wrinkle to Republicans’ plans to try to offset the cost of the massive package. The non-partisan Congressional Budget Office estimates that the bill would spike deficits by at least $2.4 trillion over the next decade.
Republicans are rushing to finish the package this week to meet the president’s Fourth of July deadline for passage.
Earlier Thursday, the Senate parliamentarian advised that a Medicaid provider tax overhaul central to the spending bill does not adhere to the chamber’s procedural rules, delivering a crucial blow to Republicans, who are counting on big cuts to Medicaid and other programs to offset trillions of dollars in Trump tax breaks.
