Written by Yeongil
Category: Geopolitics · Markets · Tax Policy
Former President Donald Trump is once again shaking up the policy world—this time with a proposal that could hit global investors where it hurts: their dividends. As part of a sweeping new tax plan dubbed “One Big Beautiful Bill,” Trump’s team has floated the idea of imposing a 35% dividend tax on certain foreign investors.
The policy, sometimes referred to as the “revenge tax,” is raising eyebrows across Wall Street and beyond. Here’s what it means, how likely it is to pass, and what potential upsides and downsides investors need to know.
📌 What Exactly Is the ‘Revenge Tax’?
Under Section 899 of the draft bill, the U.S. would levy a 35% tax on passive income—like dividends and interest—earned by foreign investors who reside in countries that impose digital services taxes (DSTs) or participate in the global minimum corporate tax framework (GloBE).
The idea? Retaliate against countries that “unfairly” tax U.S. tech companies by taxing their investors more harshly when they invest in American markets.
✅ Potential Benefits
- Protects U.S. Companies: Acts as a countermeasure against foreign tax regimes targeting U.S. tech firms.
- Raises Federal Revenue: The proposal could generate an estimated $116 billion over 10 years.
- Negotiation Leverage: Gives the U.S. bargaining power in future global tax talks.
❌ Major Drawbacks
- Investment Flight: Higher taxes may discourage foreign capital from entering U.S. markets.
- Market Volatility: Sudden tax changes inject uncertainty into equities, particularly among dividend-heavy stocks.
- Global Tensions: Allies may retaliate, potentially igniting new trade disputes.
Foreign investment funds, sovereign wealth funds, and multinational institutions could all see reduced returns under this plan. That may result in reallocations toward less punitive markets.
💬 Will This Actually Become Law?
The proposal is not law—yet. It would require Republican control of both chambers of Congress and the White House in 2025. Even then, opposition from global financial institutions and allied governments could delay or dilute the implementation.
Still, the fact that this idea is being seriously considered is enough to cause ripple effects through global capital flows and tax strategy teams worldwide.
📊 Final Thoughts: Serious Signal or Political Grandstanding?
Trump’s proposed 35% dividend tax for foreign investors is either a negotiation tactic or the start of a more isolationist U.S. tax regime. If enacted, it could significantly reshape global portfolio strategies and affect U.S. equity demand.
Investors—both foreign and domestic—should monitor this development closely as it could redefine the global attractiveness of U.S. capital markets.
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