The House of Representatives of the United States has passed one great beautiful law, also known as OBBA, a bill on reconciliation of the budget, which includes the main provisions of the Tax Act and jobs of 2017.
What is the section 899?
Section 899 of the “One Big Beautiful Bill” contains a clause that allows the imposition of a progressive tax burden of up to 20 percent on passive income of foreign investors, such as dividends or payments.
This fee will be paid by entities such as sovereign funds and companies that have businesses in the United States or individuals from countries that impose duties that they consider to be unfair, including digital services.
According to Reuters on Friday 30 May 2025, George Saravelos, head of FX Research in Deutsche Bank, said in the note that this legislation is expected to change the ongoing trade war between the US and other world nations to capital war.
“We see this legislation to create a scope for the US administration that transforms the trade war into capital war, if it wants it, a development that is in connection with today’s judicial decision by President Trump on commercial policy,” Saravelos said.
Why are Wall Street investors afraid?
The US stock market investors become concerned about the 899 section in “One Big Beautiful Bill” because they are expected to focus on foreign investors in the United States. This can, in turn, weaken the demand for US government bonds and the US dollar.
This comes in the middle of the ongoing uncertainties due to the baseline and mutual tariffs that US President Donald Trump has imposed on all imports from other world nations that led to the tariff war that is still raging.
If the US Senate approves a bill, rising tax rate on foreign investors is likely to arise in addition to tariffs, growing fiscal deficit and balloon debt to the Western nation.
“It would discourage foreign investment in US assets at a time when the country is facing a growing relying on foreign capital to finance its balloon debt. It is obvious that it is not good for the dollar,” said Elias Haddad, senior market strategist at Brown Brothers Harriman (BBH).
The Fortune report also quoted the chairman of the House Ways and Means Committee Jason Smith, who said in a panel discussion that he hopes that he is never used and instead behaves more like a “deterrent” that will prevent other nations from American companies.
When the 899 section appeared over Wall Street, the Global Financial Services Group, Nomura, told the press agency that if the Senate approves the bill, the US would probably expect the US to “get back” against a new tax rate or negotiate to find exceptions to the US Treasury and Mortgage Agency.
The Bloomberg Us Dollar index increased on Friday, May 30, 2025 by 0.05 % in 99.329.
(Tagstotranslate) progressive tax
