Market Analysis

Goldman Sachs estimates that Harris' proposed tax cuts might reduce S&P 500 earnings by 5%

Amos Simanungkalit · 05 Sep 202411.3K Views

U.S. Vice President and Democratic presidential candidate Kamala Harris' proposal to increase corporate taxes ahead of the upcoming November elections could reduce earnings for companies in the S&P 500 index by around 5%, according to analysts from Goldman Sachs.

Harris recently outlined a plan to raise the corporate tax rate from 21% to 28%, with the goal of ensuring that large corporations "pay their fair share" if she wins the election against Republican rival Donald Trump.

Goldman Sachs analysts estimated that if the corporate tax rate is increased to 28%, earnings for companies in the S&P 500 would decrease by 5%. They further noted that additional measures, such as taxing foreign income and raising the alternative minimum tax rate from 15% to 21%, could result in an earnings reduction of up to 8%.

In contrast, Trump's proposal to lower the federal corporate tax rate from the current 21% to 15% would "arithmetically" increase S&P 500 earnings by roughly 4%.

"The statutory corporate tax rate on domestic income in the U.S. currently stands at 26%, but the effective tax rate paid by the average S&P 500 company is 19%," Goldman Sachs added.

The brokerage also estimated that each 1% change in the U.S. domestic tax rate would correspond to an approximately 1% change in S&P 500 earnings per share (EPS), or about $2 per share.

Harris' rise as the Democratic nominee has reinvigorated the party's campaign, which previously had doubts about Joe Biden's viability. While polls had shown Trump pulling ahead, Harris has now overtaken him in some national surveys.