What is ‘revenge tax’ Section 899 of the One Big Beautiful Bill? Why is it raising alarms on Wall Street?

The United States' House of Representatives passed the One Big Beautiful Bill Act, also known as OBBBA, a budget reconciliation bill which includes major provisions of the Tax Cuts and Jobs Act of 2017. Wall Street investors are shifting their focus to ‘revenge tax’ Section 899 of the bill, which can impact the attractiveness of US assets. 

What is Section 899?

Section 899 of the “One Big Beautiful Bill” contains a clause that allows for the possibility of imposing a progressive tax load of up to 20 per cent on the passive income of foreign investors, such as dividend or royalty payments.

This charge will be paid by entities like sovereign funds and companies that have businesses in the United States or individuals from nations that impose duties on the US that it considers unfair, including a digital service tax.

According to Reuters' report from Friday, 30 May 2025, George Saravelos, the head of FX Research at Deutsche Bank, said in a note that this legislation is expected to transform the ongoing trade war between the US and other world nations into a capital war.

“We see this legislation as creating the scope for the U.S. administration to transform a trade war into a capital war if it so wishes, a development that is highly relevant in the context of today’s court decision constraining President Trump on trade policy,” said Saravelos in the note.

Why are Wall Street investors worried?

US stock market investors are becoming concerned over Section 899 in the “One Big Beautiful Bill,” as it is expected to target foreign investors in the United States. This, in turn, may weaken the demand for US government bonds and the US dollar.

This comes amid ongoing uncertainties due to the baseline and reciprocal tariffs imposed by US President Donald Trump on all imports from other world nations, which have led to a tariff war that is raging to date.

If the US Senate passes the bill, the rising tax rate on foreign investors is likely to raise concerns in addition to the tariff woes, rising fiscal deficit, and ballooning debt for the Western nation.

“It would deter foreign investment in U.S. assets at a time when the country faces increasing reliance on foreign capital to finance its ballooning debt. Clearly, this is not good for the dollar,” Elias Haddad, senior market strategist at Brown Brothers Harriman (BBH), told the news agency.

A Fortune report cited Even House Ways and Means Committee Chair Jason Smith, who in a panel discussion said that he hopes that it is never used and instead acts more like a “deterrent,” which stops other nations from cracking down on US firms.

As the Section 899 fears loomed over Wall Street, the global financial services group, Nomura, told the news agency that if the Senate passes the Bill, the US should likely expect a “pushback” against the new tax rate or negotiations to seek exemptions for US Treasuries and agency mortgage-backed securities.

The Bloomberg US Dollar Spot Index was up 0.05 per cent at 99.329 as of 12:00 a.m. (EDT) on Friday, 30 May 2025.