Wall Street Stages a Weird Tax Bill Freakout
'Wall Street'—meaning, we think, a subset of analysts with too much free time—is staging a freakout about the One Big Beautiful Bill's tax provisions. Allow us to suggest they read the thing first. We have, and we can reassure you that it isn't an anti-investment, protectionist 'sledgehammer,' despite florid reports to the contrary.
The latest odd panic concerns Section 899, which would create a retaliatory tax on nationals of countries that impose 'unfair foreign taxes' on American companies. Misunderstanding is now rife, but this isn't a catch-all protectionist provision. House tax writers are trying to deter foreign taxes arising from the global corporate-tax harmonization project devised by the Organization for Economic Cooperation and Development and endorsed by the Biden Administration.
The OECD project includes a 'pillar one' excess-profits tax on large, mostly American companies especially in tech and pharma, and a 'pillar two' global minimum corporate-profits tax of 15%. Section 899 takes aim at governments that attempt to collect those taxes from U.S. companies—and only those taxes.
The provision specifies that it applies to foreign taxes that implement an 'undertaxed profits rule' or a digital-services tax, both of which are hallmarks of the OECD plan. Section 899 applies up to a 20% surtax on U.S.-taxable income of companies and individuals from countries that impose the OECD taxes on U.S. firms.
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