Treasury Deal Kills Trump’s ‘Revenge Tax’ After G7 Agreement

One provision in President Donald Trump’s major tax cuts and spending bill would have led hundreds of thousands of U.S. citizens to lose their jobs, and it’s now it’s dead.

It’s the so-called “revenge tax” drafted by U.S. House of Representatives Republicans for Trump’s One Big Beautiful Bill Act (OBBBA), a provision which aimed to 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, was a retaliatory tax that would have targeted nations like Canada and about half of all European countries that have digital services taxes (DSTs) or other taxes the Trump administration determined were unfair.

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While the tax would initially penalize foreign investors and businesses, experts warned 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 say the provision stood to threaten retirees' portfolios.

Now the controversial revenge tax is likely to be axed from the bill. The United States reached a deal with its G7 partners to abandon the section 899 retaliatory tax, known as the revenge tax, on June 26. In exchange, G7 countries will exclude U.S. companies from OECD pillar 2 taxes, U.S. Treasury Secretary Scott Bessent wrote on a social media post.

“The Trump administration remains vigilant against all discriminatory and extraterritorial foreign taxes applied against Americans,” Bessent added. “We will defend our tax sovereignty and resist efforts to create an unlevel playing field for our citizens and companies.”

Democrats, alongside lobbyists on Capitol Hill, had pushed to scrap the revenge tax entirely as concerns brewed on Wall Street. The parliamentarian ruling is expected to be released in the coming days.

Here’s what the revenge tax would have meant for you, and why it matters.

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, now poised to be eliminated from Trump’s megabill, 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 planned to delay the start date of the revenge tax by one year in their version of the bill. That means if the provision were kept in OBBBA and the legislation was passed 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 threatened to 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 revenge tax may have persuaded some countries to lower their own taxes, or prompted 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.

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.”

One Big Beautiful Bill Act: 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.

Now, the proposal known as Section 899 or the revenge tax is likely to be axed from the megabill after the United States reached a deal on global corporate taxes with its G7 partners, according to Treasury Secretary Scott Bessent.

A controversial tax is dead: Wall Street and global investors heavily disputed Trump’s revenge tax. Organizations like the Global Business Alliance lobbied against the proposed Section 899 retaliatory tax provision. Executives said the measure may cause investors to withdraw investment from the U.S., leading to job losses and economic instability.

Implementing a revenge tax would have also exposed the U.S. to be on the receiving end of 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.

Stay tuned for more changes to Trump’s megabill, as some can come to impact your finances directly.

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