Goldman Sachs analysts said corporate tax increases proposed by Democratic presidential candidate Kamala Harris could reduce S&P 500 companies’ profits by about 5%, and additional taxes could inflict an even bigger hit on earnings.
Last month, Vice President Harris outlined a plan to raise the corporate tax rate from 21% to 28% to ensure “big corporations pay their fair share.”
Goldman analysts said in a note late Wednesday that they expect a 28% tax rate would take a 5% hit to profits at S&P 500 companies.
But the brokerage has previously said a Democrat winning the White House and Congress would provide the biggest boost to the overall economy over the next two years.
The department has previously predicted that economic output would be hit next year under a Republican administration, mainly due to higher import tariffs and tougher immigration policies.
Harris said Wednesday that Trump’s plan would cut federal programs that provide loans to small businesses, slash corporate tax rates and increase the U.S. budget deficit.
“The current US statutory corporate tax rate is 26% on domestic income, but the effective tax rate paid by a typical S&P 500 company is 19%,” the brokerage said.
“While each presidential candidate has proposed reforming the corporate tax code, reform is not a guarantee,” analysts led by Ben Snyder wrote in a note.
Polls had Trump building a lead over Biden before Harris narrowly edged out the Republican candidate in several national polls.
Adding a tax on overseas income and raising the alternative minimum tax rate to 21% from 15% could reduce income by up to 8% if Harris wins, they said.
If Trump were to propose reducing the federal corporate tax rate from the current 21% to 15%, S&P 500 profits would “theoretically” increase by about 4%, the analysts added.
According to the brokerage, every expected one percentage point change in the U.S. statutory domestic tax rate would change S&P 500 earnings per share by about $2.
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First Published: September 5, 2024 | 5:28 PM IST