President Biden announced on Sunday that he is withdrawing from the race for the Democratic presidential nomination, following increased pressure for him to step down after a lackluster debate performance against former President Donald Trump. In his place, Biden endorsed Vice President Kamala Harris, who has expressed her commitment to continue her candidacy. She has already garnered support from prominent figures, including California Governor Gavin Newsom, Pennsylvania Governor Josh Shapiro, and New Jersey Governor Phil Murphy.
Despite this transition in leadership, Goldman Sachs does not anticipate a significant change in the Democratic Party’s economic policy if Harris becomes the nominee. In a report led by chief economist Jan Hatzius, the analysts stated that they do not expect the Democrats’ fiscal or trade agenda to shift significantly under Harris’s potential nomination.
Following Harris’s endorsement, Goldman Sachs indicated that the odds of a Democratic victory in the presidential election have increased slightly but are still under 40%. The firm has previously projected that tax policy will emerge as a central issue in the next election cycle, particularly as key tax provisions from the Tax Cuts and Jobs Act are set to expire at the end of 2025. This sets the stage for the next administration to determine the future of these tax cuts and potential new tax measures.
Goldman’s forecasts outline potential fiscal policy changes under a Biden victory, including a proposed tax rate of 39.6% on individuals earning $400,000 or more, an increase from the existing rates of 35% and 37%. Additionally, Biden has suggested raising the corporate tax rate to 28% from the current 21%, although Goldman expressed skepticism regarding congressional approval of such a hike, predicting a more likely outcome of 25%. Furthermore, Biden’s plan includes increasing the Social Security and Medicare tax rate on incomes above $400,000 from 3.8% to 5%.
If Harris secures the nomination, speculation about her choice for a running mate is already underway, with leading candidates including Pennsylvania Governor Shapiro, North Carolina Governor Roy Cooper, Kentucky Governor Andy Beshear, and Arizona Senator Mark Kelly.