[Prepared with ChatGPT]
"Since 1982, growth in the value of foreign investments in the United States has exceeded growth in the value of U.S. investments abroad and, as a result, the U.S. net international investment position has been negative and trending lower. Even though the value of foreign investments in the United States has exceeded the value of U.S. investments abroad, the total income earned by U.S. investors on their foreign asset holdings has historically exceeded the total income earned by foreign investors on their U.S. holdings. The United States is able to earn positive net international income despite its negative net international investment position because the average yield on U.S. investments abroad has exceeded the average yield on foreign investments in the United States." [Congressional Budget Office: Aug 2021]
Chat GPT analysis and estimates
"To evaluate the estimate that the national debt would rise to 124% of GDP by FY2034 under the OBBBA (Opportunity, Growth, and Prosperity through Bipartisan Budget Act)—compared to 117% under current law—we need to take a grounded look at several key factors: current debt trends, baseline projections, the proposed policy impacts, and macroeconomic assumptions.
Baseline Context
Current law projection (CBO, 2024): Debt held by the public is projected to rise from ~99% of GDP in 2024 to 117% by 2034, assuming no major legislative changes.
GDP growth expectations (CBO, long-term): Real GDP is projected to grow at an average annual rate of about 1.8%–2.0%. Nominal GDP grows faster (~4–5% annually) due to inflation.
Deficit drivers: Aging population, rising interest costs, and mandatory spending (especially Medicare and Social Security).
Key Effects of the OBBBA
According to the CBO and JCT, the OBBBA would increase the deficit by $2.4 trillion over 10 years (2025–2034).
This estimate excludes:
If we include those omitted effects, debt service costs typically add ~10–15% more to the total deficit increase, which means an additional $250–$350 billion over a decade. That would push the total impact closer to $2.6–2.75 trillion.
Is the American Action Forum's 124% Debt/GDP Estimate Reasonable? Yes, it’s reasonable and aligns with how the national debt behaves under sustained structural deficits.
ChatGPT's Independent Estimate
Using a slightly adjusted framework:
Conclusion:
Debt held by the public would reach approximately 122–124% of GDP by the end of FY2034 if the OBBBA is enacted as written, and if its costs are not offset by economic growth or additional fiscal reforms.
Elon Musk former head of the Department of Government Efficiency (DOGE) has referred to President Donald Trump's signature tax and spending bill as a "disgusting abomination", in a widening rift between the two allies. [BBC 3 Jun 2025]
The budget - which includes multi-trillion dollar tax breaks and more defence spending while also allowing the US government to borrow more money - was passed by the House of Representatives in May 2025.
"Shame on those who voted for it," Musk said in a post on X about the legislative linchpin of Trump's second-term agenda.
The proposed OBBBA in the U.S. could have several implications for Australian investors in NASDAQ and NYSE technology stocks.
Corporate Tax Incentives: The OBBBA proposes reinstating immediate and full tax deductions for qualified equipment purchases, research and development (R&D) expenses, and broadened deductions for loan-interest payments. These provisions, expected to be retroactive to the beginning of 2025 and extend through 2029 or 2030, could benefit technology companies by reducing their tax burdens and encouraging investment in innovation. [MarketWatch]
Market Rally Potential: Bank of America has indicated that President Trump's economic policies, including those in the OBBBA, might fuel a new market bubble, particularly benefiting AI and tech stocks categorized as the "Magnificent Seven." This could lead to short-term gains for investors in these sectors. [Business Insider]
Increased U.S. Deficits and Interest Rates: The bill is projected to add at least USD2.3 trillion to the national debt, primarily through tax cut extensions. This increase in deficits may lead investors to demand higher yields on U.S. debt, raising long-term interest rates across the economy. Such a scenario could negatively impact growth-oriented tech stocks, which are sensitive to interest rate changes. [The Washington Post]
Foreign Investment Taxation: A provision in the bill, Section 899, could impose extra taxes on foreign investments in the U.S., targeting investors and companies from countries with perceived "unfair foreign taxes," potentially including Australia. This move might deter foreign investment and weaken the U.S. dollar, affecting the competitiveness of U.S. markets. [Financial Times]
Currency Exchange Risks: Fluctuations in the U.S. dollar resulting from the bill's impact on deficits and foreign investment could affect the value of your investments when converted back to Australian dollars.
Regulatory Changes: The bill includes a clause banning state-level regulations of artificial intelligence, which could influence the operations of tech companies and, by extension, Australian investments in this sector.
In the 119th Congress (2015-2016), the OBBBA was passed 215y-214n-1x on 22 May 2025.
While the House of Representatives has passed the OBBBA, it faces challenges in the Senate. CBO and the staff of the Joint Committee on Taxation (JCT) estimate that enacting the bill would increase deficits over the 2025–2034 period by USD 2.4 trillion, excluding any macroeconomic or debt‑service effects. That change stems from a reduction in revenues of USD 3.7 trillion and a reduction in outlays of USD 1.3 trillion over the 2025–2034 period.. Congressional Budget Analysis 22 May 2025.
Some Republican senators have expressed concerns over the fiscal (deficit) and debt ceiling effects of the OBBBA over the next decade. Revisions may be necessary to address these concerns before the Bill can become law. [New York Post] [Wikipedia] [Fox].
If enacted, the OBBBA could have both positive and negative effects on U.S. technology stocks. While tax incentives may boost company profits and investor returns, increased deficits and potential foreign investment taxes could introduce volatility and risks. It's essential for Australian investors, to monitor the bill's progress and consider these factors when making investment decisions.
FATCA (Foreign Account Tax Compliance Act) is a U.S. law requiring foreign financial institutions (like Australian banks and brokers) to report information about U.S. account holders to the IRS.
For Australian investors in U.S. stocks:
The U.S.–Australia Double Tax Agreement (DTA) is what provides actual tax relief and prevents double taxation for Australian residents investing in the U.S.
Key protections under the DTA:
If Section 899 of the OBBBA imposes additional tax burdens on investors from certain countries, and if Australia is deemed “non-cooperative” (e.g., for having high corporate tax or digital services taxes), this could lead to extra taxation on dividends or capital returns—even if the treaty says otherwise.
This would likely spark a treaty dispute, but until resolved, investors might feel the pinch.
ChatGPT: This is where it gets subtle:
FATCA does not protect Australian investors in US companies from tax increases under OBBBA.
The USA - Australia Tax Treaty protects Australian investors from double taxation on dividends and capital gains, but it may not override new discriminatory tax rules (e.g., Section 899).
⚠️ Section 899 is the provision most likely to directly impact Australian investors if it makes it into law.
CBO Letter to Congressmen: 20 May 2025
The OBBBA is in "draft" form, and is subject to amendment by the US Senate. However here is the text of Section 899 as at the end of May 2025
"SEC. 112028. ENFORCEMENT OF REMEDIES AGAINST UNFAIR FOREIGN TAXES.
(a) In General.--Subpart D of part II of subchapter N of chapter 1 is amended by adding at the end the following new section:
SEC. 899. ENFORCEMENT OF REMEDIES AGAINST UNFAIR FOREIGN TAXES
(a) Increased Rates of Tax on Foreign Persons of Discriminatory Foreign Countries.
(1) Taxes other than withholding taxes.
(A) In general. In the case of any applicable person, each specified rate of tax (or any rate of tax applicable in lieu of such statutory rate) shall be increased by the applicable number of percentage points.
(B) Specified rate of tax. For purposes of this paragraph, the term `specified rate of tax' means
(i) the rates of tax specified in paragraphs (1) and (2) of section 871(a),
(ii) in the case of any applicable person to which section 871(b) applies, each rate of tax in effect under section 1,
(iii) the rate of tax specified in section 881(a),
(iv) in the case of any applicable person to which section 882(a) applies, the rate of tax specified in section 11(b),
(v) the rate of tax specified in section 884(a), and
(vi) the rate of tax specified in section 4948(a).
(C) Application of increased rates to effectively connected income of nonresident alien individuals limited to gains on united states real property interests.
In the case of any individual to whom subparagraph (A) applies, the tax imposed under section on such individual (after application of subparagraph (A)) shall be reduced (but not below zero) by the excess of:
(i) the tax which would be imposed under such section (after application of subparagraph (A)) if FIRPTA items were not taken into account, over
(ii) the tax which would be imposed under such section if FIRPTA items were not taken into account, and subparagraph (A) did not apply.
For purposes of this clause, the term `FIRPTA items' means gains and losses taken into account under section 871(b)(1) by reason of section 897(a)(1)(A).
(D) Application of increased rates to certain foreign governments.
In the case of any applicable person described in subsection (b)(1)(A), section 892(a) shall not apply.
(2) Modification of base erosion and anti-abuse tax.
In the case of any corporation described in subsection (b)(1)(E) (applied by substituting `corporation' for `foreign corporation')
(A) such corporation shall be treated as described in subparagraphs (B) and (C) corporation is an applicable taxpayer,
(B) section 59A(b)(1) shall be applied by:
(i) substituting `12.5 percent' for `10.1 percent' in subparagraph (A), and
(ii) by treating the amount described in section 59A(b)(1)(B)(ii) as being zero,
(C) subsections (c)(2)(B), (c)(4)(B)(ii), and (d)(5) of section 59A shall not apply, and
(D) if any amount (other than the purchase price of depreciable or amortizable property or inventory) would have been a base erosion payment described in section 59A(d)(1) but for the fact that the taxpayer capitalizes the amount, then solely for purposes of calculating the taxpayer's base erosion payments (within the meaning of section 59A(d)) and base erosion tax benefits (within the meaning of section 59A(c)(2)), such amount shall be treated as if it had been deducted rather than capitalized.
(3) Withholding taxes.
(A) In general.--In the case of any payment to an applicable person, each rate of tax specified in section 1441(a) or 1442(a) (or any rate of tax applicable in lieu of such statutory rate) shall be increased by the applicable number of percentage points. The preceding sentence shall not apply to the 14 percent rate of tax specified in section 1441(a).
(B) Disposition of united states real property interests.--In the case of any disposition of a United States real property interest (as defined in section 897(c)) by an applicable person, the rate of tax specified in section 1445(a) (or any rate of tax applicable in lieu of such statutory rate) shall be increased by the applicable number of percentage points.
(C) Other dispositions and distributions related to united states real property interests. In the case of any disposition or distribution described in any paragraph of section 1445(e), each rate of tax in such paragraph (or any rate of tax applicable in lieu of such statutory rate) shall be increased by the applicable number of percentage points if
(i) in the case of section 1445(e)(1), the foreign person referred to in subparagraph (A) or (B) of such section is an applicable person,
(ii) in the case of section 1445(e)(2), the foreign corporation referred to in such section is an applicable person,
(iii) in the case of section 1445(e)(3), the foreign shareholder referred to in such section is an applicable person,
(iv) in the case of section 1445(e)(4),the foreign person referred to in such section is an applicable person,
(v) in the case of section 1445(e)(5), the Secretary issues regulations or other guidance providing for such increase, and
(vi) in the case of section 1445(e)(6), the nonresident alien individual or foreign corporation referred to in such section is an applicable person.
(4) Applicable number of percentage points.
For purposes of this paragraph
(A) In general.--The term `applicable number of percentage points' means, with respect to any discriminatory foreign country
(i) with respect to the 1-year period beginning on the applicable date with respect to such foreign country, 5 percentage points, and
(ii) with respect to any period after the 1-year period to which clause (i) applies, the sum of
(I) 5 percentage points, plus
(II) an additional 5 percentage points for each annual anniversary of such applicable date which has occurred before the beginning of such period.
(B) Cap on increase.
Notwithstanding subparagraph (A), the increase in any rate under paragraph (1) or (3) shall not result in such rate exceeding the amount of the statutory rate (determined without regard to any rate applicable in lieu of such statutory rate) increased by 20 percentage points.
(C) Applicable date.--For purposes of this section, the term `applicable date' means, with respect to any discriminatory foreign country, the first day of the first calendar year beginning on or after the latest of
(i) 90 days after the date of enactment of this section,
(ii) 180 days after the date of enactment of the unfair foreign tax that causes such country to be treated as a discriminatory foreign country, or
(iii) the first date that an unfair foreign tax of such country begins to apply.
(D) Application to taxable years.--For purposes of paragraph (1), the applicable number of percentage points is the applicable number of percentage points in effect for the discriminatory foreign country during the taxpayer's taxable year. If more than one applicable number of percentage points is in effect for the discriminatory foreign country during the taxpayer's taxable year, the applicable number of percentage points shall be determined by using a weighted average rate based on each applicable number of percentage points in effect during such taxable year and the number of days during which it was in effect.
For purposes of the prior sentence, the applicable number of percentage points in effect for the discriminatory foreign country for the period before the applicable date is treated as zero, and, if the taxpayer ceases to be an applicable person during its taxable year, the applicable number of percentage points in effect for the discriminatory foreign country for the period after the taxpayer ceased to be an applicable person is treated as zero.
(E) Application to withholding taxes.
For purposes of paragraph (3), the applicable number of percentage points shall be determined with respect to the date of the payment or disposition, as the case may be.
(F) Multiple discriminatory foreign countries.
For purposes of paragraphs (1) and (3), if, on any day, the taxpayer is an applicable person with respect to more than one discriminatory foreign country, the highest applicable number of percentage points in effect shall apply.
(G) Increase not applicable to nondiscriminatory foreign countries.
In the case of any foreign country which is not a discriminatory foreign country, the applicable number of percentage points is zero.
(5) Years to which applicable.
(A) Taxable year.--In the case of any person, paragraphs (1) and (2) shall apply to each taxable year beginning
(i) after the later of
(I) 90 days after the date of enactment of this section,
(II) 180 days after the date of enactment of the unfair foreign tax that causes such country to be treated as a discriminatory foreign country, or
(III) the first date that an unfair foreign tax of such country begins to apply, and
(ii) before the last date on which the discriminatory foreign country imposes an unfair foreign tax.
(B) Withholding.--In the case of any person, paragraph (3) shall apply to each calendar year beginning during the period that such person is an applicable person.
(C) Safe harbor for withholding.
Paragraph (3) shall not apply
(i) in the case of any applicable person to which clause (ii) does not apply, if the discriminatory foreign country with respect to which such person is an applicable person is not listed by the Secretary as a discriminatory foreign country, and
(ii) in the case of any applicable person described in subparagraph (E) or (F) of subsection (b)(1), if the discriminatory foreign country with respect to which such person is an applicable person (and such country's applicable date) has been listed in such guidance for less than 90 days.
(D) Temporary safe harbor for withholding agents.
No penalties or interest shall be imposed with respect to failures, before January 1, 2027, to deduct or withhold any amounts by reason of paragraph (3) if the person required to deduct or withhold such amounts demonstrates to the satisfaction of the Secretary that such person made best efforts to comply with paragraph (3) in a timely manner.
(b) Applicable Person.--For purposes of this section
(1) In general.--Except as otherwise provided by the Secretary, the term `applicable person' means
(A) any government (within the meaning of section 892) of any discriminatory foreign country,
(B) any individual (other than a citizen or resident of the United States) who is tax resident of a discriminatory foreign country,
(C) any foreign corporation (other than a United States-owned foreign corporation, as defined in section 904(h)(6)) which is a tax resident of a discriminatory foreign country,
(D) any private foundation (within the meaning of section 4948) created or organized in a discriminatory foreign country,
(E) any foreign corporation (other than a publicly held corporation) if more than 50 percent of
(i) the total combined voting power of classes of stock of such corporation entitled to vote, or
(ii) the total value of the stock of such corporation, is owned (within the meaning of section 958(a)) by persons described in this paragraph,
(F) any trust the majority of the beneficial interests of which are held (directly or indirectly) by persons described in this paragraph, and
(G) foreign partnerships, branches, and any other entity identified with respect to a discriminatory foreign country by the Secretary for purposes of this subsection.
(2) Continuation of treatment during certain periods
For purposes of this section, if a person would cease to be an applicable person for a period of less than one year, such person shall continue to be treated as an applicable person during such period.
(c) Unfair Foreign Tax.
For purposes of this section: profits rule (UTPR), digital services tax, diverted profits tax, and, to the extent provided by the Secretary, an extraterritorial tax, discriminatory tax, or any other tax enacted with a public or stated purpose indicating the tax will be economically borne, directly or indirectly, disproportionately by United States persons. Such term shall not include any tax which neither applies to:
(2) Extraterritorial tax.
The term `extraterritorial tax' means any tax imposed by a foreign country on a corporation (including any trade or business of such corporation) which is determined by reference to any income of any person) by reason of such person being connected to such corporation through any chain of ownership, determined without regard to the ownership interests of any individual, and other than by reason of such corporation having a direct or indirect ownership interest in such person.
(3) Discriminatory tax.
The term `discriminatory tax' means any tax imposed by a foreign country if
(4) Exceptions.--Except as otherwise provided by the Secretary, the terms `extraterritorial tax' and `discriminatory tax' shall not include any generally applicable tax which constitutes:
(d) Other Definitions: For purposes of this section
(e) Regulations and Other Guidance.--The Secretary shall issue such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this section, including regulations or other guidance which
Scope of Application: The surtax applies to entities that are tax residents of, or controlled by entities in, a "discriminatory foreign country".
Implementation Timeline: The surtax would take effect on the first day of the first calendar year following the later of:
Uncertainty: It's currently unclear whether U.S. Treasury securities will be subject to this surtax, adding to the ambiguity for foreign investors.
As of mid-2025, numerous countries have implemented or proposed Digital Services Taxes (DSTs) targeting revenues from digital services provided by foreign tech firms. These taxes have become a focal point in international trade relations, especially concerning the United States.
According to the International Bureau of Fiscal Documentation (IBFD), 72 countries have enacted or proposed DSTs or similar taxes. These measures primarily affect tech giants like Google, Amazon, and Facebook, levying taxes on digital advertising, user data, and online marketplaces.
Countries with DSTs are significant investors in the U.S. economy. For instance, the European Union, which collectively imposes DSTs, is a major source of foreign direct investment (FDI) in the U.S., encompassing sectors such as energy, finance, and technology. Notably, European energy firms like BP and Shell have substantial operations in the U.S., contributing significantly to employment and economic activity.
Australia is among the countries identified as potentially subject to this surtax due to its implementation of taxes like the Digital Services Tax (DST) and the Under-Taxed Profits Rule (UTPR), which the U.S. views as unfair or discriminatory.
As a result, Australian private companies investing in U.S. stocks or bonds—particularly those not publicly traded or operating through U.S. subsidiaries—could face:
Australian private companies should:
"Canada’s DSTA, which came into force on 28 June 2024, aims to ensure that large businesses pay their fair share of Canadian tax with respect to certain revenue streams. A large business may be liable for the digital services tax (DST) if its total revenue from all sources (or total consolidated group revenue) is at least €750 million during a fiscal year that ends in the preceding calendar year, and its Canadian digital services revenue (or the total of all such revenue for all entities in their consolidated group) exceeds $20 million CAD in the calendar year. Canadian digital services revenue includes revenue earned from providing online marketplace services, online advertising, social media services and the monetizing of user data.
If a taxpayer or its consolidated group meets the required conditions, the taxpayer(s) are required to pay a tax equal to 3% on their taxable Canadian digital services revenue in excess of CAD 20 million in a calendar year. Even if tax is not payable, registration under the DSTA is required if a person’s Canadian digital services revenue exceeds $10 million CAD.
While the DSTA entered into force on 28 June 2024, it applies retroactively to 1 January 2022. As a result, taxpayers may also be subject to filing and payment requirements for the 2022 and 2023 calendar years. For 2022, 2023 and 2024, the filing deadline is 30 June 2025.
Canada enacted the DSTA after the Organisation for Economic Co-operation and Development (OECD) failed to reach a multilateral agreement to implement Pillar One of the Base Erosion and Profit Shifting (BEPS) 2.0 initiative by the end of 2023."
Impact
"As a result of the enactment of the Digital Services Tax Act (DSTA), Canada would be viewed as a “discriminatory foreign country” and subject to the provisions in IRC Section 899. The impact on Canadian entities receiving income from US investments and on Canadian investment in the US generally could be substantial."
"The “applicable date” would be the first day of the calendar year beginning on or after the latest of:
EY Tax Alert 2025 No 30, 3 Jun 2025
🇫🇷 FRANCE
France has implemented a DST targeting digital advertising and online platforms. French companies have substantial investments in the U.S., particularly in the energy and aerospace sectors.
OBBBA Impact: The OBBBA's Section 899 could significantly increase the tax burden on French firms operating in the U.S., potentially leading to reduced investment and operational restructuring.
🇬🇧 UNITED KINGDOM
The UK has introduced a DST focusing on digital advertising and online marketplaces.
British firms are major investors in the U.S., particularly in finance, technology, and pharmaceuticals.
OBBBA Impact: The retaliatory tax could deter future investments from UK companies and prompt existing firms to reconsider their U.S. operations.
🇪🇺 EUROPEAN UNION
Several EU countries, including Italy, Spain, and Austria, have implemented DSTs.
The EU is a significant source of FDI in the U.S., with investments spanning various sectors.
OBBBA Impact: The OBBBA's provisions could lead to a re-evaluation of investment strategies by EU firms, potentially reducing their U.S. investments.