President Biden announced on Sunday that he would not seek the Democratic nomination for president, following significant pressure for him to step aside after a lackluster debate performance against Republican candidate Donald Trump. Shortly after this announcement, Biden endorsed Vice President Kamala Harris, who expressed her intention to continue her candidacy. She received support from notable figures such as California Governor Gavin Newsom, Pennsylvania Governor Josh Shapiro, and New Jersey Governor Phil Murphy.
Despite the leadership change, Goldman Sachs analysts, led by chief economist Jan Hatzius, predict that there will be little shift in the Democrats’ economic policies if Harris becomes the nominee. They noted that the fiscal and trade policy agenda is likely to remain consistent.
Goldman has slightly raised the odds of a Democratic victory in the presidential election to just below 40% following Harris’s endorsement. The firm’s analysts had previously highlighted that tax policy will become a central issue next year, particularly with the expiration of certain personal income tax provisions in the Tax Cuts and Jobs Act at the end of 2025. Whichever candidate wins the upcoming election will play a crucial role in determining the future of these tax cuts, as well as potential new tax measures.
Goldman Sachs outlined various fiscal policy forecasts in the event of a Biden win, including a proposed tax rate of 39.6% for individuals earning over $400,000, an increase from the current 35%/37%. They also mentioned a potential corporate tax rate of 28% proposed by Biden, though they doubt Congress would approve it, suggesting a more feasible outcome might be around 25%. Additionally, Biden’s suggested Social Security and Medicare tax rate for high earners would rise from 3.8% to 5%.
If Harris secures the nomination, speculation points to potential candidates for the vice-presidential slot, with names like Governor Shapiro, North Carolina Governor Roy Cooper, Kentucky Governor Andy Beshear, and Arizona Senator Mark Kelly being mentioned.