Harris’ Tax Plan Could Reduce Corporate Profits by 5%, According to Goldman Sachs – Reuters

By Roshan Abraham

Democratic presidential candidate Kamala Harris’ proposed increase in corporate taxes could lead to a reduction in company earnings by approximately 5%, with further taxes potentially impacting profits even more severely, according to analysts at Goldman Sachs.

Last month, Vice President Harris announced plans to elevate the corporate tax rate from the current 21% to 28%, aiming to ensure that major corporations contribute their fair share.

In a recent note, Goldman analysts indicated that at the 28% tax rate, earnings for S&P 500 companies are expected to decline by about 5%. However, they previously stated that the overall economy could experience significant gains over the next two years if Democrats secure the presidency and control Congress.

The analysts forecast that economic output would be adversely affected next year under a Republican administration, primarily due to heightened import tariffs and stricter immigration regulations.

On Wednesday, Harris criticized Trump’s proposals, claiming they would eliminate federal programs that provide loans to small businesses, cut the corporate tax rate, and increase the U.S. deficit.

The brokerage noted that the current statutory corporate tax rate on domestic income is 26%, but the average effective tax rate paid by a typical S&P 500 company is around 19%.

They emphasized that while each presidential candidate has suggested modifications to the corporate tax system, such changes are not guaranteed.

Polling data has shown that while Trump had initially gained a lead over Biden, Harris has recently surpassed the Republican candidate in some national surveys.

Analysts warned that adding taxes on foreign income and raising the alternative minimum tax rate from 15% to 21% could further decrease earnings by as much as 8% if Harris were to win the election.

Furthermore, they noted that Trump’s proposed reduction of the federal corporate tax rate from 21% to 15% would "arithmetically" increase S&P 500 earnings by about 4%. For each estimated 1 percentage point change in the U.S. statutory domestic tax rate, S&P 500 earnings per share would adjust by roughly $2, according to the brokerage.