Wall Street is closely monitoring potential tax changes if Democratic candidate Kamala Harris wins the upcoming presidential election. Investors are particularly concerned about her proposal to raise the corporate tax rate from 21% to 28%, which could lead to a 5% decrease in S&P 500 company earnings according to Goldman Sachs. In contrast, former President Donald Trump has proposed lowering the rate to 15% for companies that manufacture in the U.S., which could increase earnings by 4%.
The prospect of higher capital gains taxes under Harris is another area of concern for investors, especially since it could impact net gains and lead to more aggressive tax-minimizing strategies. However, experts like Brian Gardner of Stifel suggest that increases in capital gains taxes typically generate less revenue than anticipated and could have broad negative effects on the market.
Overall, while businesses generally favor lower taxes, Harris’s proposed tax hikes are seen as potentially leading to lower corporate profits and stock valuations. However, any changes would require congressional approval, adding uncertainty to the potential economic impact. Meanwhile, Trump’s plans are expected to contribute to inflation and a higher federal budget deficit, which could lead to increased Treasury debt issuance. Ultimately, Wall Street is bracing for market volatility and economic shifts depending on the election outcome.
