Former President Donald Trump is poised to leverage a significant advantage in his dealings with Australian Prime Minister Anthony Albanese, thanks to his proposed Big Beautiful Bill. This massive budget bill is an attempt to eliminate taxes for the rich. It calls into question what it might mean for global markets and international relations at large. With his sights set on a reelection campaign, Trump is trying to reestablish control over the Republican party. This bill could have monumental consequences not only for the US, but especially for countries like Australia.
The Big Beautiful Bill comes through once again, this time likely enriching some of the world’s wealthiest people. The bill poses really troubling questions about the sustainability of America’s fiscal house of cards. Critics, including tech billionaire Elon Musk, have expressed alarm over the bill’s potential to exacerbate the United States’ already precarious economic situation. This bill will further mount pressure on America’s ticking time bomb of $36 trillion in national debt. This debt has already become the nation’s second-largest line item.
Implications of the Big Beautiful Bill
The Big Beautiful Bill also contains a very harmful provision called Section 899, which sets up “retaliatory taxation.” This measure requires large increases in federal income tax and withholding tax. It specifically excludes companies and investors from “discriminatory foreign countries.” Tax penalties can increase up to 5 percent annually. If so, they might go as high as 20 percentage points over existing treaty rates, rendering foreign investment in the U.S. prohibitively expensive.
Of all the countries, Australia is the one that will most suffer from such adjustments. The country is putting enormous pressure on multinationals to make sure they are paying their fair share of taxes. As a result, this tough new approach has sent many Australian companies and superannuation funds into a tailspin. Yet, in 2018, Amazon crowed more than $1 billion in Australian sales. Instead, the tech giant paid an effective tax rate of well under $20 million in taxes. The introduction of retaliatory taxation would severely exacerbate the already fraught relationship between Australian businesses and U.S. tech behemoths.
We can expect Trump’s bill to favor his biggest campaign contributors, namely his preferred technology titans like Elon Musk, Jeff Bezos, Mark Zuckerberg, and Sundar Pichai. These same individuals stand to gain the most from the tax deductions and credits that the legislation would authorize. That should raise a lot of equity and fairness questions in our tax system. As these companies prosper, their profits might be tremendous. This will allow them to widen the chasm between their profits and tax payments, leading to taxpayer outrage and increased attention.
Economic Concerns for the United States
Those are high hurdles for the U.S. to leap this year, as it desperately needs to refinance $7 trillion in existing debt. Simultaneously, it needs to raise new revenues to fill widening gaps. Government spending has skyrocketed over 6 percent from this time last year in the Biden administration. Due to this, the fiscal environment is becoming increasingly dangerous. The U.S. dollar is in the process of tanking, and market interest rates are spiking. All of these factors are contributing to the increasing cost for the federal government to borrow money.
Critics argue that Trump’s Big Beautiful Bill could lead to an unsustainable fiscal policy, further deteriorating the nation’s financial standing. As deficits expand and debt levels increase, foreign investors who have previously supported U.S. government bonds may be less inclined to continue their investments. This change would severely shake international financial markets. Countries such as Australia, given their close security and economic ties with the U.S., will be hit hardest.
Elon Musk’s criticism of Trump’s plan raises some important points that speak to wider fears regarding economic security. Musk’s warning points to a broader concern among industry leaders. They’re worried that the proposed tax cuts will only help a small number of people and risk their long-term fiscal health. Rising deficits and debt can set off a death spiral of economic calamity. This instability would not only affect U.S. citizens, it would ripple across the globe through allied nations.
Australia’s Position in Global Economic Dynamics
As Australia heads into a discussion on their growing economic partnership with the United States, they’re at somewhat of a fork in the road. The Big Beautiful Bill has significant threats, but abundant promise, for Australian businesses and investors. Its stated purpose is to shield domestic interests by imposing retaliatory tariffs. This approach could scare away foreign investment from some of the biggest players in the tech sector.
Perhaps most notably, Australia has played a trail-blazing role in pushing multilaterals to enforce aggressive global tax compliance. Local businesses and local superannuation funds worry about retaliatory Trumpian measures from the U.S. They fear that going down this road could worsen tensions on trade. Such changes could send corporations into a “mild state of panic.” And they are just now having to catch up with changing tax policy.
Given these issues and challenges, it is critical for Australian policymakers to weigh their approach very closely as they continue down this path. Finding a balance between the imperative of fair taxation and the goal of attracting foreign investment will take some serious diplomacy and negotiation. Whether or not Australia is consistently and intelligently opposed will help determine how mercifully the storm passes and goes on to produce future economic winners and losers.
