Trump's 'Revenge Tax' Risks U.S. Jobs and Retirement Security

Image shows the U.S. Capitol Building split between Democrat blue and Republican red.

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published 23 June 2025

One provision in President Donald Trump’s major tax cuts and spending bill may lead hundreds of thousands of U.S. citizens to lose their jobs, and Democrats want to do away with it.

The so-called “revenge tax” drafted by U.S. House of Representatives Republicans for Trump’s One Big Beautiful Bill Act (OBBBA) would impose extra taxes on foreign individuals and businesses earning income in the U.S. if they’re from countries that levy “discriminatory or unfair taxes” against the U.S.

The measure, tucked within Section 899, could target nations like Canada and about half of all European countries that have digital services taxes (DSTs) or other taxes the Trump administration determines are unfair.

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While the tax would initially penalize foreign investors and businesses, experts warn that it could cause international companies and investors to pull back from the U.S., leading to significant job losses over the next decade in every state.

That’s not all, some experts warn that the provision may even impact retirees' portfolios.

Democrats, alongside lobbyists on Capitol Hill, are pushing to scrap the provision entirely as concerns brew on Wall Street. The parliamentarian ruling is expected to be released on Monday, per Bloomberg.

If adopted by Congress, this is what a revenge tax could mean for you.

What is the revenge tax?

The so-called revenge tax, known as Section 899, would allow the U.S. to apply higher taxes on foreign individuals, businesses, foundations, and governments connected to jurisdictions that impose “unfair or discriminatory taxes” on American companies and individuals.

According to the provision, the punitive tax would target countries like Canada or the United Kingdom that levy “unfair” corporate taxes, which include digital services taxes (DSTs), diverted profits taxes (DPTs), and undertaxed profits rules (UTPRs) on the U.S.

The measure, which is undergoing revisions by the U.S. Senate, would impose a 5% additional tax rate each year, above statutory rates, capped at 15%. That’s down from the 20% cap the House Republicans had drafted originally.

The Joint Committee on Taxation (JCT) suggests that the House version of the revenge tax would raise $116 billion over the next decade.

Senate Republicans also delayed the start date of the revenge tax by one year. That means that if the OBBBA is signed into law, the new tax would be effective as of 2027.

Revenge tax would cause job loss

A key goal of proposed Section 899 would be to sway countries to change their tax laws and lessen the “unfair tax” burden on U.S. firms and businesses.

Still, the proposed legislation could shake up job security in the U.S.

For one, it could reduce the incentives for foreign foundations, businesses, or individuals to invest in the U.S. According to the Tax Foundation, it would be a “step backward” from the Trump administration’s goal to attract investment and jobs in the U.S.

In fact, as many as 700,000 American jobs could be lost over a decade as a result of the retaliatory tax, per estimates by the Global Business Alliance (GBA), a trade group representing international companies like Honda, IKEA, and LEGO. That would amount to the erosion of $100 billion annually in GDP.

The revenge tax would cause every state to suffer job losses:

In Tennessee, as many as 16,500 jobs could be lost
California could lose as many as 77,500 jobs
Florida could lose an estimated 44,200 jobs
In Texas, as many as 61,700 jobs could be cut

What would that look like? The GBA suggests this would mean fewer job opportunities, canceled expansions, or abandoned research as international companies react to the retaliatory tax.

“The immediate effect of these taxes is to raise the cost of investment in the United States for foreign-resident individuals or corporations,” wrote Kyle Pomerleau and Stan Veuger with the American Enterprise Institute (AEI). “A higher cost of capital would reduce inbound investment, shrink the U.S. capital stock, reduce labor productivity, and reduce wages.”

Risks to retirement savings

If adopted, the new tax may persuade some countries to lower their own taxes, or prompt others to retaliate, leading to market instability. We’ve seen that already play out with Trump’s sweeping global tariffs, as other countries have retaliated in kind.

That said, experts warn that the retaliatory taxes in Section 899 could cause foreign investors to pull away from U.S. equities. The latest government data shows that foreign investors own about 18% of the U.S. corporate stock, a record high.

According to the Global Business Alliance, this would cause downward pressure on share prices and impact the portfolios of millions of U.S. retirees — including those in 401(k) and pension funds.

But its important to keep in mind that this provision is still under consideration by the U.S. Senate. As reported by Kiplinger, a market downturn won’t necessarily crush your retirement. There are often ways you can strategize to offset the impact to your savings.

“When foreign capital flees, financing costs for U.S. companies rise, growth slows, and stock valuations decline,” GBA analysts said. “That affects not only business expansion and hiring, but also the value of 401(k)s, pensions, and taxable portfolios held by retired and hard-working Americans.”

The bottom line

The One Big Beautiful Bill Act was passed by the U.S. House of Representatives last month and is facing revisions by the Senate with a target date of July 4.

Some provisions, like the so-called “revenge tax” may be aimed at penalizing foreign businesses and investors, but can ultimately have ripple effects that impact U.S. citizens' jobs and economic stability.

Currently, organizations like the Global Business Alliance are lobbying against the proposed Section 899 tax provision. Executives argue that the measure may cause investors to withdraw investment from the U.S., leading to job losses and economic instability.

It may even cause retaliatory taxes from penalized countries, similar to growing tensions linked to Trump’s tariffs.

“Establishing a new taxing authority with open-ended definitions would heighten global investment uncertainty and further erode trust in the U.S. market,” wrote Adam Michel, director of tax policy studies at the Cato Institute.

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Gabriella Cruz-Martínez is a seasoned finance journalist with 8 years of experience covering consumer debt, economic policy, and tax. Before joining Kiplinger as a tax writer, her in-depth reporting and analysis were featured in Yahoo Finance. She contributed to national dialogues on fiscal responsibility, market trends and economic reforms involving family tax credits, housing accessibility, banking regulations, student loan debt, and inflation.

Gabriella’s work has also appeared in Money Magazine, The Hyde Park Herald, and the Journal Gazette & Times-Courier. As a reporter and journalist, she enjoys writing stories that empower people from diverse backgrounds about their finances no matter their stage in life.