Goldman Sachs believes that Vice President Kamala Harris’ economic policies will largely mirror those of President Biden if she becomes the Democratic presidential nominee. This analysis follows President Biden’s announcement on Sunday that he would withdraw from the race, a decision prompted by escalating calls for him to do so after a challenging debate performance against former President Donald Trump.
In his statement, Biden endorsed Harris, who subsequently confirmed her candidacy and received endorsements from prominent figures such as California Governor Gavin Newsom, Pennsylvania Governor Josh Shapiro, and New Jersey Governor Phil Murphy. However, Goldman Sachs predicts that there will not be significant changes to policy.
Analysts, led by chief economist Jan Hatzius, noted in a statement that they do not anticipate any meaningful shifts in the Democrats’ fiscal and trade policy agenda should Harris become the nominee. The firm’s assessment suggests that the likelihood of Democrats winning the presidential election has only slightly increased, remaining just below 40%.
Goldman Sachs previously indicated that tax policy will be a significant issue in the upcoming year, particularly with the expiration of certain provisions from the Tax Cut and Jobs Act set for the end of 2025. Consequently, the outcome of the election will heavily impact decisions regarding the extension of tax cuts and potential new tax measures.
The firm provided several projections for fiscal policy in the event of a Biden victory:
– A proposed tax rate increase to 39.6% for individuals earning $400,000 or more, up from the current rates of 35% and 37%.
– A proposed increase in the corporate tax rate to 28%, up from the current 21%. However, Goldman analysts expressed skepticism that Congress would agree to this and suggested a 25% rate might be more realistic. In contrast, Trump has promised to lower the rate to 20%.
– An increase in the Social Security and Medicare tax rate on earnings over $400,000 to 5%, up from the current 3.8%.
If Harris were to secure the nomination, prediction markets speculate that potential candidates for the vice presidential slot might include governors Shapiro of Pennsylvania, Roy Cooper of North Carolina, Andy Beshear of Kentucky, or Senator Mark Kelly from Arizona.