Wei Cui (British Columbia; Google Scholar), The Logic of the Revenge Tax, 188 Tax Notes Fed. 37 (July 7, 2025):

The United States possesses unique market power as a capital importer and provider of financial services to the rest of the world. It is thus in a strong position to raise revenue from foreign investors and users of American financial services, potentially in much more efficient and progressive ways than using tariffs on imported goods. However, it has historically applied unusually favorable income tax treatment to foreign investors. While the use of American market power to underwrite the country's exercise of hegemonic power (e.g., applying financial sanctions) is now familiar, Americans seem little aware of the potentials of its market power in global finance for raising revenue.

The One Big Beautiful Bill Act formerly proposed adding section 899 to the Internal Revenue Code. Though commonly labeled the “revenge tax”, the proposal can be seen as a rare—and restrained—exercise of U.S. market power. It is used primarily to counter two foreign taxes that also rely on market power, thus embodying a stance that just as the U.S. has refrained from using its market power, so should other nations. This is the clearest in the response to digital services taxes: proposed section 899 is likely a better instrument for responding to DSTs than Section 301 tariffs. In the case of the UTPR under the OECD’s global minimum tax, proposed section 899 also counters a type of synthetic hegemon, exposing assumptions in UTPR design that have previously drawn little comment.

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