U.S. Kills ‘Revenge Tax’ Before Implementation Amid Global Pushback

What was the revenge tax?

Section 899 — often referred to as the "revenge tax" — was a controversial provision in President Trump’s proposed budget bill that aimed to impose retaliatory taxes on foreign companies operating in the U.S. if their home countries were seen as having “discriminatory” tax systems. It was largely seen as a response to digital services taxes (DSTs) imposed by other countries on American tech firms, and to the global minimum tax framework agreed upon by the Biden administration and the OECD in 2021. The provision had sparked significant concern across Wall Street and international business circles, who warned it could chill foreign investment and trigger a global tax war.

Treasury and Congress Scrap Global Tax Provision That Alarmed Markets

On Thursday, the U.S. Treasury Department and congressional leaders announced they would remove Section 899 from the “One Big Beautiful Bill Act” — effectively killing the so-called revenge tax before it ever took effect.

Treasury Secretary Scott Bessent confirmed in a social media post that, following discussions with G7 partners, the U.S. would abandon the proposed tax in exchange for favorable treatment of U.S. companies under the global tax framework. Bessent said he formally requested Congress to eliminate Section 899, and congressional tax leaders Senator Mike Crapo and Representative Jason Smith announced they would comply.

Section 899 was designed to penalize foreign companies with U.S. operations if their home jurisdictions adopted tax regimes deemed unfair to American businesses. Analysts at Citi said it could have “facilitated penalty taxes” and increased compliance costs and legal complexity for global firms investing in the U.S.

Market Relief and Global Business Reaction

The decision to scrap the provision was met with immediate relief on Wall Street and among international investors. Law firm Holland & Knight noted that “significant concern had been expressed regarding Section 899’s potential impact on foreign investment in the U.S., particularly given its scope and complexity.”

Jonathan Samford, CEO of the Global Business Alliance, praised the move. “This provision would have stifled investment and deepened economic isolation. We commend President Trump and congressional leaders for stepping back from the brink,” he told CNN.

Business groups had spent weeks in Washington lobbying against the measure, warning that it would send a protectionist signal at a time when global cooperation is critical.

A Strategic Recalibration in Global Tax Policy

The “revenge tax” had been crafted in part as a direct response to the global tax agreement reached during the Biden administration, which established a 15% global minimum corporate tax. Republicans had long opposed the deal, arguing that it ceded U.S. tax sovereignty.

Additionally, Section 899 targeted countries implementing digital services taxes that disproportionately impacted American tech giants like Amazon, Google, and Meta. The Trump administration has repeatedly criticized these DSTs as “discriminatory and extraterritorial.”

Still, in a significant shift, the Trump administration chose diplomacy over confrontation. “The Trump administration remains vigilant against all foreign taxes that unfairly target Americans,” Bessent said, “but we are committed to resolving disputes through negotiation rather than retaliation.”

What This Means for Business

The removal of Section 899 is a clear signal to global investors that the United States remains open for business — and willing to cooperate on complex tax issues. It also removes a major point of uncertainty from the market at a time when capital flows and investor confidence are being tested by global inflation, rising tariffs, and geopolitical tensions.

By shelving the “revenge tax,” the U.S. avoids escalating tax battles that could have resulted in retaliatory measures and investment pullback. Instead, the move paves the way for renewed collaboration on international tax standards — without undermining American economic competitiveness.