As the Democratic presidential race evolves, Goldman Sachs anticipates that Vice President Kamala Harris’ economic policies will remain largely consistent with those of President Biden. This perspective follows Biden’s recent announcement of his withdrawal from the race, largely prompted by mounting pressures after a challenging debate performance against former President Donald Trump.
In a statement released shortly after his announcement, Biden endorsed Harris, who has expressed her commitment to continue her campaign. She has since garnered several significant endorsements, including those from California Governor Gavin Newsom, Pennsylvania Governor Josh Shapiro, and New Jersey Governor Phil Murphy. However, Goldman Sachs notes that this political shift is not expected to lead to substantial changes in policy.
Goldman analysts led by chief economist Jan Hatzius stated that they do not foresee any significant alterations to the Democrats’ fiscal and trade policy agenda should Harris become the nominee. The firm has slightly adjusted the probability of the Democrats winning the White House to just under 40%.
Researchers at Goldman also highlighted that tax policy is expected to be a major focus in the upcoming year, especially with the impending expiration of certain provisions from the Tax Cuts and Jobs Act at the end of 2025. The outcome of the election will be pivotal in determining the future of tax cuts and potential new taxes.
Their projections for fiscal policy in the event of a Biden victory include:
– A proposed tax rate increase to 39.6% for individuals earning $400,000 or more, up from the current rates of 35% to 37%.
– A suggested hike in the corporate tax rate to 28%, an increase from the current 21%. Analysts are doubtful that Congress would agree to this and believe a 25% rate is more feasible. In contrast, Trump has promised to reduce the corporate tax rate to 20%.
– An increase in the Social Security and Medicare tax rate on incomes exceeding $400,000 to 5%, up from 3.8%.
Should Harris secure the nomination, speculation around potential vice presidential candidates includes governors Shapiro of Pennsylvania, Roy Cooper from North Carolina, Andy Beshear of Kentucky, and Senator Mark Kelly of Arizona.