Treasury Secretary Scott Bessent urges Congress to dump Trump’s retaliatory tax in BBB

Treasury Secretary Scott Bessent has formally asked Congress to delete a controversial provision buried in President Donald Trump’s newest budget plan.

The section, known as Section 899, would’ve allowed the US to slam companies and investors from other countries with additional taxes, specifically if those countries imposed harsh tax policies under international agreements.

Scott said on Thursday that the rule no longer made sense because parts of the OECD’s Pillar 2 tax regime won’t apply to US companies anymore.

According to reporting from the Financial Times, Scott posted on X that the Treasury had requested lawmakers in both the House and Senate to remove the section from the “Big, Beautiful Budget.” The provision was originally designed to hit back at countries using the OECD’s global minimum tax rules to go after US multinationals.

Trump signed onto the bill with the rule intact, but the economic and political climate has changed. Scott said the US had reached an understanding with G7 countries after “months of productive dialogue,” making the retaliation part of the bill unnecessary.

Treasury walks away from Pillar 2 enforcement

Pillar 2 was part of a 2021 deal agreed under former President Joe Biden, meant to enforce a 15% global minimum corporate tax rate. That deal gave countries the power to collect extra taxes if multinational firms weren’t paying enough at home.

But now the US says those rules won’t apply to American companies anymore, meaning other countries won’t be able to collect taxes from them under Pillar 2. That’s what made Scott come out and push for the removal of Section 899.

The tax had raised alarms in the financial sector. Major banks and investors warned it would drag down corporate investment and cause money to flow out of the US Some even said it could make the US a less attractive place for foreign capital.

The Treasury Department had tried to narrow the damage by excluding interest on US Treasury securities from the scope, but the provision still applied to dividends, rent, and royalties, which industry groups said would wreck passive investment flows.

Even within Trump’s own party, some Republicans in the House weren’t sold on the tax. They said on Wednesday that Section 899 was too risky and hinted that it might be taken out of the final bill. Scott’s announcement gave them the cover they needed to go public. Right now, the GOP wants to get the bill passed before July 4, which is when Trump wants to sign the law to mark Independence Day with a legislative win.

Wall Street lobbies hard against the tax

The financial industry didn’t stay quiet. They made it known that they hated the plan. Wall Street firms warned that adding this kind of penalty on foreign investors would backfire.

The US already saw a drop in demand for government debt earlier this year, and investors blamed Trump’s plan to slap tariffs on nearly every major trade partner. That dip created serious concern, especially since the Treasury would need to issue a ton of bonds to pay for the spending in the budget bill.

The threat of Section 899 just added fuel to that fire. Business groups feared the extra tax would discourage foreign direct investment and make investors steer clear of US markets altogether.

One of the most vocal critics was Jonathan Samford, CEO of the Global Business Alliance, who said: “This is what leadership looks like. Choosing economic strength over squandered opportunity, investment over isolation, and American workers over misguided tax hikes.”

The political shift came fast. Once Scott made the Treasury’s position public, the path to removing Section 899 got clearer. The House GOP moved quickly to prepare for a final vote on the broader budget package, which also includes an extension of Trump’s 2017 individual tax cuts and new tax breaks meant to appeal to middle-income Americans heading into the 2026 election season.

The unfinished parts of the OECD deal—including the idea of replacing digital services taxes with new rules on profit-sharing across countries—no longer appear to be a concern for the administration. With the G7 on board and foreign tax enforcement no longer a threat to US firms, the retaliatory move lost its reason to exist.

In Scott’s words, the new understanding with the G7 “provides greater certainty and stability for the global economy” and will “enhance growth and investment in the United States and beyond.” His message was clear: the US doesn’t need a revenge tax when it’s already negotiated its way out of the fight. Now it’s on Congress to act before foreign investors pull back even more.

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