Goldman Sachs has assessed that if Vice President Kamala Harris becomes the Democratic presidential nominee, her economic policies will not significantly differ from those of President Joe Biden. This perspective comes in the wake of Biden’s announcement on Sunday that he is withdrawing from the race for the Democratic nomination, largely due to increasing pressure after a challenging debate performance against former President Donald Trump.
Following Biden’s statement, he endorsed Harris, who has expressed her intent to pursue the candidacy further, garnering multiple high-profile endorsements, including those from California Governor Gavin Newsom, Pennsylvania Governor Josh Shapiro, and New Jersey Governor Phil Murphy. However, Goldman Sachs does not foresee a major shift in policy direction.
Goldman analysts, led by chief economist Jan Hatzius, indicated that they do not expect any significant changes in the Democrats’ fiscal and trade policy agendas if Harris secures the nomination. They estimate that the odds of the Democrats winning the presidential election have slightly increased, remaining just under 40%.
The firm previously noted that a primary focus for fiscal policy in the upcoming year will revolve around taxes, particularly as the personal income tax provisions of the Tax Cuts and Jobs Act are set to expire at the end of 2025. This implies that the incoming administration will be instrumental in determining the future of these tax cuts and whether new taxes will be instituted.
Goldman provided several fiscal policy forecasts under the scenario of a Biden win, including:
– 39.6%: The proposed tax rate that Democrats are considering for individuals earning $400,000 or more, an increase from the current rates of 35% and 37%.
– 28%: The corporate tax rate suggested by Biden, a rise from the present 21%. Goldman expressed skepticism that Congress would agree to this rate, suggesting that a 25% rate is more realistic. In contrast, Donald Trump, the presumed Republican nominee, has pledged to reduce the corporate tax rate to 20%.
– 5%: The proposed tax rate for Social Security and Medicare on incomes exceeding $400,000, up from 3.8%.
Should Harris become the nominee, prediction markets indicate that there is a strong possibility she may choose among governors like Josh Shapiro of Pennsylvania, Roy Cooper of North Carolina, Andy Beshear of Kentucky, or Senator Mark Kelly of Arizona for her vice presidential pick.