GOP tax chief says Trump bill will keep foreign nations "in check"
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House Ways and Means Committee chair Rep. Jason Smith (R-Mo.) arrives at a meeting on Capitol Hill. Photo: Anna Moneymaker/Getty Images
House Ways and Means chair Rep. Jason Smith (R-Mo.) said a measure in President Trump's proposed tax bill that takes aim at foreign investors is a way to keep other nations "in check."
Why it matters: Wall Street is worried that a tax on foreign investment contained in the "One Big Beautiful Bill" could make overseas investors reluctant to buy U.S. assets — at a time they are already wary of U.S. policies.
What they're saying: "A big concern is that foreign governments, based on agreements entered into by the Biden administration, is trying to suck away billions of dollars from U.S. companies," Smith told Axios' Neil Irwin at the Reagan National Economic Forum.
- "This is a way to help put them in check, so that they understand that if they do that to our businesses, there will be consequences for their actions. Hopefully it'll never take effect," Smith said.
Catch up quick: The provision, called Section 899, proposes increasing tax rates for foreign direct investment from countries with unfair tax policies, as judged by the Trump administration.
- So, for example, an overseas sovereign wealth fund that owns U.S. stocks and bonds could face a tax on the earnings on their investment.
- The fear is that such a levy turns off foreign investors at a crucial moment: there are concerns that the safe-haven status of U.S. assets is in question, which would make it more difficult to borrow.
What to watch: Asked whether Smith was concerned about this possibility, the top tax lawmaker said discriminatory tax regimes were a risk to U.S. corporations.
- "We're the first country in 2017 that created a global minimum tax. They don't even accept our global minimum tax. That's completely unfair," Smith said.
- "We're being punished for actually following what they're trying to do," Smith added.
The other side: "The measure risks detonating investor confidence and could set off a damaging pullback of foreign capital just as the US needs it most," said Nigel Green, CEO of deVere Group, a financial advisory and asset management firm.
- "It punishes the very people whose capital keeps American businesses growing, whose investments fund US debt, and whose companies are employing millions of US workers."
- "If Washington wants to repel foreign investment into America, this is exactly how to do it."
