As we gear up for the November Presidential elections, the topic of corporate tax rates has taken center stage in the political arena. U.S. Vice President and Democratic presidential candidate Kamala Harris has proposed a corporate tax hike, aiming to increase the rate to 28% from the current 21%. This move is part of her plan to ensure that “big corporations pay their fair share” if she wins the election against Republican rival Donald Trump.
Analysts at Goldman Sachs have weighed in on the potential impact of Harris’ proposed tax hike on corporate earnings. According to their estimations, the earnings of companies on the benchmark S&P 500 index could decrease by about 5% under a 28% taxation rate. Additionally, if foreign income taxation is implemented along with an increase in the alternative minimum tax rate to 21% from 15%, earnings could potentially see an 8% reduction.
On the flip side, Trump has proposed a cut in the federal statutory domestic corporate tax rate to 15% from the current 21%. This move, if implemented, could lead to a 4% increase in S&P 500 earnings. It’s important to note that the current U.S. statutory corporate tax rate on domestic income stands at 26%, while the total effective tax rate paid by the typical S&P 500 company is 19%, according to Goldman.
The analysts at Goldman projected that for each 1 percentage point change in the U.S. statutory domestic tax rate, the shift in S&P 500 earnings per share (EPS) would be slightly less than 1%, translating to about $2 of S&P 500 EPS.
Harris’ nomination as the Democratic vice presidential candidate has injected new energy into the campaign, which previously faced doubts about Joe Biden’s chances against Trump. Recent polls have shown Harris gaining ground, even edging ahead of the Republican candidate in some national opinion polls.
As we navigate the upcoming elections and the potential impact of proposed tax policies on corporate America, it’s essential for investors to stay informed and make well-informed decisions. Stay tuned to Extreme Investor Network for expert analysis and insights on all things finance and investments.