WASHINGTON—In a decision that reshapes the landscape of President Donald Trump’s major legislative plan, Congressional Republicans have agreed to drop a controversial tax clause from the proposed bill. This move came following a recommendation from Treasury Secretary Scott Bessent, as stated on Thursday.
The provision, known as Section 899, intended to impose taxes on businesses with foreign stakeholders and investors from nations deemed to levy “unfair foreign taxes” against U.S. companies. This measure raised concerns that it would deter numerous companies from investing in the United States due to the potential burden of significant taxes. Consequently, removing this provision poses a challenge to Republican objectives in balancing the overall fiscal impact of the vast proposal.
In a social media announcement, Bessent expressed that he had pursued the removal after engaging in negotiations with international representatives on the Organization for Economic Co-operation and Development Global Tax Deal. Following what he described as “months of productive dialogue,” an agreement safeguarding American interests was reached among G7 nations.
Leaders Senate Finance Committee Chairman Mike Crapo of Idaho and House Ways and Means Committee Chairman Jason Smith from Missouri have agreed to eliminate the contentious provision. However, they emphasised the importance of vigilance, ready to act promptly if other stakeholders delay or deviate from the agreed-upon commitments.
Bessent reassured that eliminating the clause would create “greater certainty and stability for the global economy and will enhance growth and investment in the United States and beyond.”
A report from the Global Business Alliance, which advocates for international enterprises like Toyota and Nestlé, predicted that implementing the provision would result in 360,000 job losses and reduce the U.S. gross domestic product by $55 billion annually over a decade. This group, along with others, previously communicated to Senate Majority Leader John Thune and Crapo, voicing their concerns about Section 899’s implications.
Amid pressures to conclude legislative proceedings swiftly, Republicans strive to finalize the bill to align with the president’s Fourth of July target passage date. However, their efforts encountered a stumbling block when the Senate parliamentarian advised that a proposed Medicaid provider tax revision integral to the spending bill was inconsistent with chamber procedural statutes. This decision delivers a significant setback to GOP plans, which rely on substantial reductions in Medicaid and other programs to counterbalance the expansive Trump tax cuts.