Democratic candidate Vice President Kamala Harris has reportedly pledged to raise taxes if she wins the November presidential election, raising concerns on Wall Street that it could hit corporate earnings.
Harris has been criticized for taking too long to announce her policy proposals and for avoiding interviews with the press, but she has been clear in her support of raising the corporate tax rate from 21% to 28%.
Harris said the corporate tax hike would ensure that “large corporations pay their fair share” because “they often pay lower tax rates than teachers, nurses and firefighters.”
Meanwhile, President Trump has proposed further cuts to corporate tax rates.
During his presidency, he reduced the tax rate from 35% to 21%.
President Trump has said that if he is re-elected, he wants to lower taxes on companies that make goods in the United States to 15%.
As Harris and Trump prepare to face off in November, Wall Street is closely watching their economic policies.
“Taxation is a huge concern for investors,” said Yun Yu Ma, chief investment officer at BMO U.S. Wealth Management. He told Reuters.“Tax policy is the most important issue in this election.”
Goldman Sachs analysts warned in a note last week that Harris' proposed 28% tax rate would hit S&P 500 companies' profits by 5% while Trump's tax cuts would boost profits by about 4%.
Ma said Harris' tax hikes would likely cause corporate profits to plummet and lower stock valuations.
“Essentially, the tax hike could cause the stock market to fall significantly,” Ma told Reuters.
The Democratic candidate proposed raising capital gains tax rates on profits made from selling stocks, gold, and other assets that increase in value over time.
Harris wants to raise the tax rate on those making more than $1 million to 28%, a smaller increase than Biden's plan to raise the rate to 39.6%.
Harris argues that lowering capital gains tax rates would encourage investors to put more money into startups and small businesses.
President Trump has not said whether he would change the tax rate from the current maximum of 20%.
“The capital gains tax increase will be broadly disappointing in terms of government revenue,” Brian Gardner, chief Washington policy strategist at investment bank Stifel, told Reuters. “But it will be negative for markets overall. By how much, it's hard to say.”
Morgan Stanley said the correlation between capital gains taxes and the stock market is not significant, but the tax debate could cause market instability in the near term.
Ken Mahoney, CEO of Mahoney Asset Management, told The Post that if Republicans take control of the Senate, some of Harris' proposed tax increases could be defeated, sending markets into a tailspin.
“She will likely try to circumvent and take advantage of executive orders just like her predecessor did,” Mahoney said.
He warned that Harris' executive order could be “not business-friendly or economy-friendly.”
The Harris campaign did not immediately respond to a request for comment.
President Trump's tax proposals are widely seen as good for businesses, but Economists worry his plan could reignite inflation. and increasing the national deficit.
“All the models seem to be looking at Trump running a bigger deficit than Harris,” Bruce Melman, a partner at nonpartisan government relations firm Melman Consulting, told Reuters.
“Businesses and corporations prefer low taxes to high taxes. But there is a general recognition that sooner or later there will be a debt crisis.”
Goldman Sachs is It would be best for the economy The Democratic White House and Congress oppose Trump's proposals to raise import taxes and tighten immigration policies, fearing they could stifle economic production.
Some of President Trump's 2018 tax cuts are set to expire next year but would be extended if he is re-elected.
“If President Trump returns to office, he will make the Trump tax cuts permanent, slash corporate tax rates for companies that put America's interests first, and make America affordable and prosperous again,” Caroline Leavitt, national spokeswoman for the Trump campaign, told The Post in a statement.
Harris has said she would continue tax cuts only for people making less than $400,000 a year.
“The fact that the current tax law is expiring at the end of next year is at the center of a lot of questions we're getting from clients,” Nicole Webb, senior vice president at financial planning firm Wealth Enhancement, told Reuters. “It's an issue that's at the forefront of a lot of people's minds.”
