Goldman Sachs has analyzed the potential economic implications of Vice President Kamala Harris becoming the Democratic presidential nominee, suggesting her economic plans will likely remain in line with those of President Joe Biden.
President Biden announced his withdrawal from the race for the Democratic nomination on Sunday, following mounting pressure for him to step aside after his uncertain debate performance against former President Donald Trump. Shortly thereafter, he endorsed Harris, who confirmed her intention to run and received support from prominent figures including California Governor Gavin Newsom, Pennsylvania Governor Josh Shapiro, and New Jersey Governor Phil Murphy. However, according to Goldman Sachs, this change in leadership is not expected to result in significant shifts in policy.
Goldman analysts, led by chief economist Jan Hatzius, stated that they do not anticipate any major alterations to the Democrats’ fiscal and trade agenda should Harris secure the nomination. The odds of a Democratic victory in the upcoming presidential election have increased slightly, now estimated at just under 40%.
Previously, Goldman researchers indicated that tax policy is poised to take center stage next year, particularly with the impending expiration of provisions from the Tax Cuts and Jobs Act in 2025. The next election winner will need to address whether these tax cuts will be extended and the introduction of any new taxes or reductions.
The firm provided specific forecasts regarding fiscal policy should Biden win re-election:
– A proposed tax rate of 39.6% on individuals earning $400,000 or more, an increase from the current 35%/37%.
– A suggested corporate tax rate of 28%, up from the current 21%. However, Goldman expressed doubts about congressional agreement, suggesting a more likely outcome would be a 25% rate, compared to Donald Trump’s pledge to reduce the rate to 20%.
– An increase in the Social Security and Medicare tax rate for incomes exceeding $400,000 to 5%, up from the existing 3.8%.
If Harris secures the nomination, prediction markets indicate that the vice-presidential slot may go to Pennsylvania Governor Shapiro, North Carolina Governor Roy Cooper, Kentucky Governor Andy Beshear, or Arizona Senator Mark Kelly.