Trump Administration Tells Congress to Kill ‘Revenge Tax’ From Policy Bill

The Trump administration has directed Republican lawmakers to remove a provision from their tax and spending bill that would have hit some international companies operating in the United States.

The decision to remove the so-called revenge tax came as Treasury Secretary Scott Bessent said on Thursday that the United States had reached a deal with other Group of 7 nations that exempts American companies from a separate “global minimum tax.” That global tax was brokered by the Biden administration and was opposed by President Trump and Republican lawmakers who argued it was giving control of the U.S. tax base to other nations.

The move to drop the revenge tax follows intense lobbying pressure from international business groups, which warned the new tax would hurt American workers and chill foreign investment in the United States. Mr. Bessent, in a post on social media, said that the United States would work with other nations to enact the agreement more broadly across the Group of 20 nations and the rest of the world.

“This understanding with our G7 partners provides greater certainty and stability for the global economy and will enhance growth and investment in the United States and beyond,” Mr. Bessent wrote. “By reversing the Biden administration’s unwise commitments, we are now protecting our nation’s authority to enact tax policies that serve the interests of American businesses and worker.”

The revenge tax was included in the tax and domestic policy bill moving through both the House and Senate in response to the 2021 global minimum tax. The levy would punish companies based in countries that either adhere to the terms of the global minimum tax agreement or impose digital services taxes on American technology companies. Several countries have enacted these taxes on income that businesses earn online regardless of where they are physically located.

If it had been signed into law, the provision would have substantially increased the tax bills of many foreign companies that operate in the United States. It was expected to raise more than $50 billion over a decade, according to congressional estimates. A House version of the measure was even more onerous, allowing the United States to increase tax rates on foreign companies by as much as 20 percentage points over time if their headquarters were in “discriminatory foreign countries” with “unfair foreign taxes.”

President Trump has made clear that he wanted nothing to do with the 2021 deal, which aimed to rewrite rules for how the world’s largest companies would be taxed around the globe.

The deal created a new global minimum tax rate of at least 15 percent for companies, regardless of where their headquarters were based. The aim was to prevent countries from lowering their tax rates as a way to attract multinational corporations, a situation that Biden officials said was creating a “race to the bottom” that left nations with fiscal shortfalls.

Other countries, including the European Union, moved forward with the minimum tax. But the United States never put in place a tax that complied with the international agreement. That left American companies vulnerable to additional taxes levied by foreign governments.

Mr. Bessent made no mention on Thursday of how the Trump administration would respond to digital services taxes, which many European countries and Canada have adopted. However, he made clear that the United States remained prepared to respond to taxes that it viewed as unfair.

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

The Treasury secretary has said previously that digital services taxes have been part of trade negotiations with other countries.

The United States already imposes its own minimum tax on multinational companies’ global earnings, though it works differently than the international agreement. Absent Congress overhauling international tax rules, American officials had previously pushed for international negotiators to accept the existing American minimum tax as compliant with the new global framework.

Wall Street was among those pushing for Congress to drop the revenge tax, fearing that it would deter foreign direct investment and further dissuade oversees investors from increasing their exposure to U.S. assets more broadly. Demand for U.S. debt has already dipped this year as Mr. Trump has pursued steep tariffs on virtually all of America’s trading partners. That has generated substantial concern, given the surge in government bonds that the Treasury Department would need to issue to fund the tax and spending bill.

The provision exempted interest on Treasury securities, but its broader coverage of passive investment income, such as dividends, rent and royalties, was seen by industry lobbyists as particularly problematic.

Business groups that railed against the tax praised Mr. Bessent’s announcement.

“This is what leadership looks like,” said Jonathan Samford, chief executive of the Global Business Alliance. “Choosing economic strength over squandered opportunity, investment over isolation, and American workers over misguided tax hikes.”

Andrew Duehren contributed reporting.