US Treasury Secretary Bessent Pushes Lawmakers to Remove Retaliatory Tax from Budget Bill Following International Agreement
Washington, D.C. – U.S. Treasury Secretary Scott Bessent has officially requested that Republican lawmakers remove a controversial tax provision, known as Section 899, from a major tax and spending bill currently being debated in Congress. The move follows the United States reaching a “joint understanding” with Group of Seven (G7) industrial nations regarding the implementation of a global corporate tax agreement.
The request comes as Republicans push to pass their sweeping fiscal package rapidly, potentially aiming for a final vote as early as this Saturday, to allow President Donald Trump to sign it into law before the July 4th Independence Day holiday.
What is Section 899?
The proposed Section 899 is a retaliatory tax measure that would grant the U.S. president the authority to impose charges against foreign countries deemed to have implemented “unfair taxes” on U.S. companies or imposed specific digital service taxes seen as unfairly targeting large American technology companies. This provision was viewed as a potential response to countries imposing levies on U.S. firms under the 2021 global tax agreement brokered by the Organization for Economic Cooperation and Development (OECD), which President Trump has criticized as unfair.
G7 Agreement Paves the Way
Secretary Bessent announced the request via social media, stating that after months of productive dialogue, G7 countries had reached an agreement defending American interests.
“We will announce a joint understanding among G7 countries that defends American interests,” Bessent posted, explaining that under this new G7 agreement, the 15% global corporate minimum tax proposed under “Pillar 2” of the OECD deal will not apply to U.S. companies. He added that the U.S. would work cooperatively to implement this understanding across the broader OECD-G20 Inclusive Framework.
This development appears to facilitate President Trump’s stated intention to potentially withdraw the U.S. from the broader OECD tax pact negotiated by the previous administration, but with potentially fewer negative consequences for U.S. firms operating abroad.
Investor and Business Concerns Sparked Opposition
Beyond the international agreement, significant pressure to remove Section 899 also came from within the U.S. and from global business interests.
Wall Street Alarm: Financial market participants, including fund managers and venture capital firms, expressed significant concern that the retaliatory tax could disrupt financial markets and exacerbate existing unease created by President Trump’s trade policies.
Business Group Lobbying: Trade organizations representing international companies actively lobbied against the provision. The Global Business Alliance, for instance, warned that Section 899 could discourage foreign investment in the U.S. and estimated it could cost the U.S. economy 360,000 jobs and $55 billion annually in lost GDP over a decade.
- International Impact: The proposal also raised concerns globally, with reports indicating it could have resulted in billions of dollars in losses for entities like Australian superannuation funds investing in the U.S.
- asia.nikkei.com
- www.theglobeandmail.com
- www.afr.com
Following Bessent’s request and the widespread opposition, prominent Republican leaders, including Senate Finance Committee Chairman Mike Crapo and House Ways and Means Committee Chairman Jason Smith, confirmed they would remove the provision from the bill. However, they included a caveat, stating that Republicans would be ready to take “immediate action” to reinstate the measure if the international agreement falters or implementation is delayed.
Budgetary Context and Challenges
The removal of Section 899 presents a challenge for Republicans working on the extensive legislative package. The bill, which includes extensions of the 2017 individual tax cuts and adds new breaks, is expected to significantly increase deficits. The non-partisan Congressional Budget Office estimated the package could add at least $2.4 trillion to deficits over the next decade.
Removing the retaliatory tax measure eliminates a potential revenue source or offset, adding to the fiscal hurdles. This comes shortly after another component intended to help offset costs – an overhaul of the Medicaid provider tax – faced a setback when the Senate parliamentarian advised it did not comply with chamber rules, dealing a crucial blow to Republican fiscal plans.
Secretary Bessent concluded that the G7 understanding and the subsequent removal of the tax proposal would “provide greater certainty and stability for the global economy and will enhance growth and investment in the United States and beyond.”
