“For many clients, the most important equity market implication is the potential for higher corporate tax rates,” Goldman Sachs strategist David Kostin said in a note on Monday, according to the publication.
Strategists at Goldman Sachs predicted that along with corporate tax hikes, individuals might also expect to see more paid out in taxes if President Donald Trump doesn’t remain in the White House for a second term.
While the thought of higher taxes could cause corporate America some concern, the biggest question on many minds is whether the decreased profits are enough to cause a major economic downturn. According to Yahoo Finance‘s analysis, Trump’s 2017 tax cuts dropped corporate taxes about 13 percent, which caused an increase in profits and an uptick in stock buybacks.
That change is believed to have contributed to what was an all-time high for the stock market in February, prior to major changes due to the COVID-19 outbreak, and some economists believe that another tax break would again cause the market to thrive.
Biden’s proposal would likely cause a different outcome, according to Goldman’s predictions. The investment bank cited data from The Tax Foundation, which stated that the former vice president’s proposed tax structure would raise the domestic income rate from 21 percent to 28 percent and double the Global Intangible Low Tax Income on foreign profits.
Biden also plans to impose a minimum 15 percent tax rate and add an additional payroll tax for those in higher income brackets. According to Goldman Sachs, there would likely also be changes to the personal tax code, which could include an increase in capital gains and dividends for high earners.
Latest Goldman Sachs estimate on the global economy: It contracted a non-annualized 16% between mid-January and mid-April. Says, "this is almost certainly the deepest recession since at least World War 2." pic.twitter.com/PhUTNCZXhY
— Michael S. Derby (@michaelsderby) June 8, 2020
While Trump’s future plans might have caused favorable predictions in the minds of economists, he will likely need more than just promises of more tax cuts to win the White House for a second term. The Inquisitr reported on Sunday that around 80 percent of Americans feel that the country is “out of control,” given the current state of social unrest.
According to an NBC News/Washington Post poll released on Sunday, the majority of Americans across all political affiliations believe that the country is in a state of chaos in the wake of protests and riots of the death of George Floyd, with 66 percent of Republicans sharing that concern.
The majority of Americans questioned were also more concerned about the death of Floyd than the protests his death sparked.