Trump Tax Policy Shift Toward Stability Must Stay the Course

The US Treasury Department is quickly moving to draft regulations in line with the changes made in this year’s tax-and-spending package. The administration has rightly shifted its focus from pursuing legislative changes to implementing new permanent rules.

But in this shift, it’s crucial that the White House doesn’t lose focus on the larger task at hand. The new law made our tax code at home more stable, and the Treasury Department’s forthcoming regulations must reinforce—rather than undermine—this stability as tax uncertainty abroad remains.

Stability is a foreign concept to many who have watched international tax debates in recent years. In the current rush of US regulatory guidance, one could be forgiven for overlooking how much the ground has shifted in the last decade.

US law is settled for the first time in many years—at least for as long as Congress chooses to leave current provisions alone. But beyond US borders, uncertainty still casts a shadow over the world’s largest companies.

Much of this is in response to actions taken during the first Trump administration.

In 2017, Republican lawmakers triggered an earthquake in US international tax policy. A new participation exemption and novel anti-avoidance rules overtook the long-standing approach to allowing deferral of US tax on foreign earnings.

The new rules included two separate minimum taxes and a reduced rate for exports connected to intellectual property held in the US. These were embodied in three policies, all of which were part of the Tax Cuts and Jobs Act:

• The tax on global intangible low-tax income, which is now called the net controlled foreign corporation tested income, or NCTI
• The base erosion and anti-abuse tax, or BEAT
• The foreign derived intangible income, now labeled the foreign derived deduction eligible income, or FDDEI

We knew even in 2017 that additional changes would eventually come and that these international rules were just the calling card. Earthquakes often come with aftershocks, and automatic changes baked into the new rules clearly created the possibility for lawmakers to revisit their choices in the TCJA.

But then a change of government came. Though President Joe Biden vowed to scale back the entirety of Trump’s tax reforms, his White House and the Democratic-controlled Congress didn’t use his signature tax law, the Inflation Reduction Act, to change the cross-border policies from the TCJA.

Instead, lawmakers introduced yet another new regime for taxing worldwide income: the corporate alternative minimum tax.

In this year’s tax-and-spending law, Republicans took the opportunity to adjust the rules they introduced in 2017. One of their most critical adjustments was making the rules permanent.

What we have now is a set of anti-avoidance rules and minimum taxes that are the combination of two partisan efforts to reshape the rules for multinational corporations. It’s as impressive as it is unwieldy.

Permanency doesn’t absolve lawmakers from leaving many questionable provisions in place. The BEAT often hits unintended targets. The multiple anti-avoidance layers of Subpart F, NCTI, and CAMT don’t work well together.

Despite these quirks, the administration must now move to finalize regulations in line with the now stable provisions of US cross-border rules.

After the TCJA, it took nearly three years for final regulations on cross-border provisions. Taxpayers are still awaiting the final form of CAMT regulations more than three years after the passage of the 2022 tax-and-climate law.

The Treasury Department can align current rules with this year’s legislation and give taxpayers more certainty than they’ve had for nearly a decade. But even if US lawmakers and regulators have created stability, there are still forces beyond US borders that are creating several uncertainties for US companies.

There are many unresolved issues with the global minimum tax and how it will treat US rules. The July 2025 G7 agreement on a side-by-side approach hasn’t been finalized. Digital services taxes and broader gross-based withholding taxes on cross-border services leave much work to be done in bilateral and multilateral discussions.

What the US can do, though, is resolve open questions of how US tax rules work and give lawmakers a chance to see the system working as a whole—and assess the need for any additional changes without having to face an arbitrary deadline.

When the dust settles, policymakers will then be able to set a strategic path for improving the relationship of existing US rules, understand their impact on competitiveness and growth, and continue the work to achieve the goals of the 2017 and 2025 reforms to make the US the most attractive place for global businesses to invest and grow.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Daniel Bunn is president and CEO of the Tax Foundation, a think tank in Washington, DC.

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