Top Executives Lobby Against Trump Tax Reform Clause, Warn of 8.4 Million Job Losses

Numerous top executives from some of the world's largest corporations are set to descend upon Washington this week to lobby against a controversial provision in the Trump tax reform bill. The "Section 899" clause, if approved by Congress, would impose additional taxes on companies and investors from specific countries, potentially jeopardizing millions of American jobs. The executives warn that this move could lead to significant economic repercussions, including reduced foreign investment and job losses. They argue that the proposed tax would disproportionately affect American companies that rely on global supply chains and international markets. The lobbying effort underscores the growing concern among multinational corporations about the potential impact of the tax reform on their operations and profitability. The executives are expected to meet with key lawmakers and administration officials to voice their opposition and advocate for the removal of the clause. The outcome of these discussions could have far-reaching implications for the U.S. economy and its relationship with other nations.

Representatives from approximately 70 companies, including Shell, Toyota, SAP, and LVMH, are scheduled to meet with congressional members to discuss the potential impact of Section 899. These companies collectively provide 8.4 million jobs in the United States and are concerned about the potential negative effects on their operations. The clause, if enacted, would allow the U.S. to impose additional taxes on companies and investors from countries deemed to have punitive tax policies. This could affect a wide range of foreign entities, including companies owned by foreign investors, international companies with U.S. branches, and investors. Executives fear that this could lead to a decrease in investment and a reduction in U.S. assets.

Jonathan Samford, president of the Global Business Alliance, which represents international companies, stated that the repeal of Section 899 is gaining momentum in the Senate. Senators are recognizing that this provision contradicts the government's economic vision of attracting more investment to the U.S. The financial industry is also taking action. The International Bankers Association plans to send its members to Washington to meet with Treasury Department officials and Republican members of the Senate Banking Committee to oppose Section 899. The association argues that the clause could stifle foreign direct investment, create financial market chaos, and threaten jobs in various states and communities. The association points out that foreign banks' U.S. branches underwrite over 70% of bonds issued by foreign companies in the U.S., accounting for nearly a third of the total dollar-denominated bond issuance. In 2023, these foreign banks provided over 1.3 trillion dollars in loans to U.S. companies, supporting 540 billion dollars in foreign direct investment and generating 27 billion dollars in revenue.

The International Bankers Association aims to push for a one-year delay in the tax increase and a reduction in its scope. The association's CEO, Beth Zorc, encourages the Senate to address concerns about the clause and consider modifications to protect international investment in U.S. jobs and businesses. The potential impact of Section 899 extends beyond the U.S. borders. Countries that could be affected by the clause include several European nations, as well as India, Brazil, Australia, and the United Kingdom. If the U.S. Treasury Department designates a country as having unfair tax practices, entities from that country, including companies, residents, and their overseas-controlled entities, could face higher tax rates on their investments and operations in the U.S. According to the clause, the federal income tax rate on dividends, interest, and royalties earned by these entities in the U.S. would gradually increase. The first year would see a 5% increase over the current applicable rate, rising by 5% each subsequent year, with a maximum increase of 20%. This could result in withholding taxes and branch profits taxes reaching a maximum of 50%. The clause would also impose taxes on previously tax-exempt U.S. sovereign wealth fund investment portfolios.

Republicans in Congress have been seeking ways to reduce the cost of the Trump tax law. According to the nonpartisan Joint Committee on Taxation, Section 899 would raise 116 billion dollars for the U.S. government over the next decade. However, the Congressional Budget Office estimates that by 2034, the entire law would still increase the U.S. debt by 2.4 trillion dollars. Jason Smith, chairman of the House Ways and Means Committee, recently expressed his hope that Section 899 would not be implemented, as other countries might change their laws in response. Smith stated that a significant concern is that foreign governments, under agreements signed by the Biden administration, are attempting to divert tens of billions of dollars from U.S. companies. He views the clause as a deterrent, signaling to foreign governments that their actions will have consequences. Smith hopes that the clause will never come into effect.