Scoop: Treasury officials defend "revenge tax" from wary GOP senators

Top Treasury officials are privately explaining to GOP senators that Section 899 of the House-passed budget bill is already forcing foreign countries to the negotiating table, according to administration officials.Why it matters: Critics are calling the provision a "revenge tax." But the Trump administration sees Section 899 as an important tool – like tariffs – to help negotiate better deals for American multinational corporations.While Trump officials are signaling to senators a willingness to make changes to the provision, they are also making the case for why it should stay in Trump's "one big beautiful bill," officials said.Some Republican senators, including Sen Thom Tillis (R-N.C.), have expressed reservations about the provision.Zoom out: On his first day in office, Trump promised to undo the Biden's administration' plan to impose a global minimum corporate tax. He signed an executive order that it "has no force or effect."Section 899 is an attempt to give the White House more power to negotiate with the Organization for Economic Co-operation and Development, a collection of 38 market-based economies, which has also been critical of Trump's trade policies.While the original outline of the global minimum tax rates was included in President Biden's Inflation Reduction Act, it ultimately required foreign countries to come to a common agreement on how to tax multinational corporations.Republicans howled at that process and argued that it usurped Congress's constitutional power to establish tax rates. They also had policy concerns with a global minimum tax.Zoom in: Section 899 of the House-passed budget bill is designed to penalize countries that impose taxes on U.S. companies, including a global minimum tax of 15% as well as a digital services tax.It allows the U.S. to increase tax rates for foreign direct investment on countries it claims has unfair tax policies.Wall Street is worried that a potential tax on foreign investment could harm U.S. assets and the broader economy.But there's some indication that European countries are open to modifying their policies in order to mollify the Trump administration, Bloomberg reported.The other side: A coalition of trade associations, led by the Global Business Alliance, wrote to Senate Majority Leader John Thune (R-S.D.) and Senate Finance Committee Chair Mike Crapo (R-Idaho) to call for the removal of the provision."As the budget reconciliation process advances, we urge you to uphold the pro-growth principles embedded in the Tax Cuts and Jobs Act (TCJA) and avoid tax increases that would undermine American jobs, innovation, and long-term economic growth," the coalition wrote.The bottom line: The Trump administration is essentially arguing to senators that Section 899 might never have to be used.House Ways and Means Chairman Jason Smith essentially made this point last week when he told Axios' Neil Irwin that "hopefully it'll never take an effect."

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