S&P 500 could see 5% earnings hit from Harris’ proposed tax reforms, Goldman Sachs says

(Reuters) – A corporate tax hike proposed by U.S. Vice President and Democratic presidential candidate Kamala Harris ahead of November’s presidential election could cut earnings for companies in the benchmark S&P 500 by about 5 percent, analysts at Goldman Sachs said.

Last month, Harris proposed raising the corporate tax rate to 28 percent from 21 percent and making sure “big corporations pay their fair share” if he wins the election against Republican rival Donald Trump.

Goldman estimated that at a 28% tax rate, S&P 500 companies’ earnings would be hit by 5%.

Adding taxation of foreign earnings and an increase in the alternative minimum tax rate to 21 percent from 15 percent could reduce revenue by as much as 8 percent, analysts said.

On the other hand, Trump’s proposed 15 percent exemption from the current 21 percent federal domestic corporate tax rate would “arithmetically” boost S&P 500 earnings by about 4 percent.

“The current statutory U.S. domestic income tax rate is 26 percent, but the total effective tax rate paid by the typical S&P 500 company is 19 percent,” the brokerage added.

Goldman estimated that for every 1 percentage point change in the US statutory domestic tax rate, the change in S&P 500 earnings per share (EPS) would be slightly less than 1%, or about $2 of S&P 500 EPS.

Harris’ rise to the top of the Democratic ticket has reignited a Democratic campaign that has harbored doubts about Joe Biden’s chances.

Polls showed Trump building a lead over Biden, but Harris has since moved ahead of the Republican nominee in some national opinion polls.

(Reporting by Roshan Abraham in Bengaluru; Editing by Nivedita Bhattacharjee)