Goldman Sachs has indicated that if Kamala Harris becomes the Democratic presidential nominee, her economic plans would not differ significantly from those of President Biden. This assessment follows Biden’s announcement on Sunday that he is stepping out of the race for the Democratic nomination, a decision prompted by mounting pressure following a lackluster debate performance against Donald Trump, the Republican candidate and former president.
In the wake of Biden’s statement, he endorsed Vice President Kamala Harris, who has confirmed her intention to run for president. Harris has garnered several key endorsements, including support from California Governor Gavin Newsom, Pennsylvania Governor Josh Shapiro, and New Jersey Governor Phil Murphy. However, analysts at Goldman Sachs expect that the shift in leadership will not lead to any substantial changes in policy direction.
Goldman Sachs analysts, led by chief economist Jan Hatzius, expressed in a note that they do not foresee any meaningful change in the fiscal and trade policy agenda, even if Harris becomes the nominee. They estimated that the chances of the Democrats maintaining control of the White House increased slightly, yet still remains under 40%.
The firm had previously noted that taxes will be a central fiscal focus in the coming year, particularly as personal income tax provisions from the Tax Cuts and Jobs Act are set to expire at the end of 2025. The eventual winner of the presidential race will play a crucial role in determining whether those tax cuts will be extended or if new taxes will be imposed.
Goldman’s projections for fiscal policy under a potential Biden administration include a proposed tax rate of 39.6% for individuals earning $400,000 or more, an increase from the current rates of 35% to 37%. Furthermore, the proposed corporate tax rate under Biden’s plan would rise to 28%, up from the current 21%, although Goldman expressed skepticism about Congress’s willingness to agree to such a significant increase, suggesting that a 25% rate might be more achievable. Additionally, Biden aims to increase the Social Security and Medicare tax rate on incomes over $400,000 to 5%, up from the existing rate of 3.8%.
Should Harris secure the nomination, prediction markets indicate that potential candidates for her vice presidential pick may include Governors Shapiro of Pennsylvania, Roy Cooper of North Carolina, Andy Beshear of Kentucky, or Senator Mark Kelly from Arizona.