Senate weighs tax bill that targets foreign levies, cuts Medicaid, and rolls back green incentives
US President Donald Trump could soon gain the power to retaliate against countries imposing digital taxes on US tech companies, as per Reuters, under Section 899 of a sweeping tax bill now advancing in the US Senate.
The provision would allow the US Treasury to designate such taxes as “unfair” and impose escalating tariffs on individuals and businesses from countries labelled “discriminatory.”
According to Representative Ron Estes, “If foreign countries want to come in the United States and tax US businesses, then those foreign-based businesses ought to be taxed as well.”
The measure has gained traction amid growing foreign digital levies on platforms like Meta’s Instagram and Google.
Germany is considering a 10 percent tax on digital platforms, joining 17 other countries in similar moves.
The Joint Committee on Taxation estimates Section 899 could generate US$116bn over the next decade.
However, as NYU’s Tax Law Center advisor Duncan Hardell cautioned, foreign investors “may change their behavior to avoid the taxes... including potentially by simply investing elsewhere.”
Trump’s bill also reintroduces trade friction, as reported by CTV News, with plans to double tariffs on steel and aluminum imports to 50 percent.
At a rally in Pennsylvania, Trump said the duties would “further secure the steel industry in the United States.” Canada, which supplies nearly 25 percent of US steel, faces direct impact.
Canadian Labour Congress president Bea Bruske called the plan “a direct attack on Canadian workers,” warning it could devastate the industry and cost thousands of union jobs.
The Canadian Chamber of Commerce echoed those concerns, with president Candace Laing stating the tariffs “come at a great cost to both countries.”
The broader tax and spending bill, passed narrowly by the House on May 22, includes a US$4tn debt ceiling hike and major changes to domestic policy.
According to USA Today, the package would extend tax cuts, introduce new tax breaks for overtime and tipped wages, and cut US$625bn from Medicaid, potentially affecting 7.6 million Americans.
It would also repeal US$550bn in clean energy tax credits.
These measures have drawn concern from Republican senators, including Susan Collins and Josh Hawley, particularly over Medicaid and energy-related provisions in states that benefited from previous tax incentives.
NPR reported that US Senate Republicans are under pressure to pass the legislation swiftly, with US Treasury Secretary Scott Bessent warning of an August debt ceiling deadline.
Ron Bonjean, a former US Senate aide, noted that “this is one of the largest bills in American history,” and while some Republicans oppose sections on Medicaid and spending, he expects the bill to pass.
Trump has encouraged even more aggressive tax reductions, saying during a White House appearance, “I’d like to see a bigger cut in taxes.”
However, as reported by USA Today, some House Republicans already faced public backlash at town halls over the bill’s contents, particularly from constituents concerned about cuts to health and environmental programs.
Trump’s stance on retaliatory digital taxes also follows the global minimum corporate tax framework pushed by former US President Joe Biden.
As per Reuters, Republicans argue this framework benefits Chinese firms, while foreign governments cite it to justify higher taxes on US companies with large research and development credits.
The Senate must reconcile any changes with the House before returning the bill to the lower chamber, where Republicans can afford to lose only three votes for final approval.
It remains unclear whether the Treasury will use the retaliatory authority or rely on the threat of action to shift foreign tax policies.
