Wall Street is concerned that if Vice President Kamala Harris wins the presidency in November it would hurt corporate earnings as the Democratic nominee has vowed to raise taxes, according to a report.
Though Harris has faced criticism for taking too long to release her policy ideas and avoiding interviews with the press, she has made clear her stance on raising the corporate tax rate from 21% to 28%.
Harris has said that raising corporate taxes would ensure “big companies pay their fair share” because they “often pay taxes at a lower rate than our teachers, nurses and firefighters.”
Meanwhile, Trump has proposed further reducing the corporate tax rate.
He reduced the tax rate from 35% to 21% during his presidency.
He said that if Trump is re-elected, he wants to reduce the tax rate to 15% for companies whose products are made in America.
As Harris and Trump prepare to face off in November, Wall Street has its eyes set on their economic policies.
“Tax policy is a huge concern for investors,” said BMO US Wealth Management CIO Yung-Yu Ma 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 cause earnings at S&P 500 companies to drop by 5%, while Trump's cut would boost earnings by about 4%.
Ma said Harris's higher taxes would likely drive down corporate profits and lower stock valuations.
“Essentially, higher taxes are likely to cause a significant decline in the stock market,” Ma told Reuters.
The Democratic candidate proposed raising the capital gains tax rate — which is a tax on profits made by selling something that increases in value over time, like stocks or gold.
Harris wants to raise the tax rate for those earning more than $1 million to 28%, which is lower than Biden's plan to raise the rate to 39.6%.
Harris has argued that lowering capital gains rates would encourage investors to put more money into startups and small businesses.
Trump has not said whether he wants to change the current maximum rate of 20%.
“In terms of government revenue, capital gains tax increases have generally been modest,” Brian Gardner, chief Washington policy strategist at investment bank Stifel, told Reuters. “But this would be broadly negative for the market. How negative it would be is hard to say.”
Morgan Stanley said the correlation between capital gains tax and the stock market is negligible, but the tax debate could create market volatility in the meantime.
Ken Mahoney, CEO of Mahoney Asset Management, told the Post that if Republicans win a majority in the Senate, some of the tax hikes proposed by Harris would likely be rejected, resulting in a market standoff.
“She will likely try to circumvent and use executive orders like her predecessor,” Mahoney said.
He warned that Harris' executive orders may not be “friendly to business or the economy.”
The Harris campaign did not immediately respond to requests for comment.
Although Trump's tax proposals are widely viewed as beneficial for businesses, Economists worry his plan could lead to another wave of inflation And the national deficit will increase.
“All the models assume Trump will increase the deficit more than Harris will,” Bruce Mehlman, a partner at bipartisan government relations firm Mehlman Consulting, told Reuters.
“Businesses and corporations prefer lower taxes to higher taxes. But it is generally accepted that sooner or later, we are going to run into a debt crisis.”
Goldman Sachs said The economy will be best served By the Democratic White House and Congress, because higher import taxes and stricter immigration policies proposed by Trump could hamper economic output.
Some of Trump’s 2018 tax cuts expire next year, but he plans to extend them if he’s re-elected.
“When President Trump returns to power, he will make the tax cuts permanent, cut the corporate tax rate for companies that put American interests first, and make America affordable and prosperous again,” Trump campaign national press secretary Carolyn Levitt said in a statement to the Post.
Harris has said she would leave the tax cut only for those earning less than $400,000 annually.
“The expiration of the current tax law at the end of next year is at the center of a lot of the questions we get from our clients,” Nicole Webb, senior vice president at financial planning firm Wealth Enhancement, told Reuters. “It's at the forefront of a lot of people's minds.”
