Goldman Sachs believes that if Kamala Harris becomes the Democratic presidential nominee, her economic policies will not differ significantly from those of President Biden. This assertion follows Biden’s announcement on Sunday that he is withdrawing from the presidential race after facing intense pressure to do so, particularly after a less-than-stellar debate performance against Donald Trump.
In his statement, Biden endorsed Harris, who has expressed her intention to continue her campaign. Following this, she received multiple endorsements from prominent figures, including California Governor Gavin Newsom and Pennsylvania Governor Josh Shapiro. Despite the leadership change, Goldman Sachs predicts that there will be little meaningful shift in the Democratic Party’s fiscal and trade policies.
Goldman analysts, led by chief economist Jan Hatzius, noted that the chances of a Democratic victory in the upcoming election have increased slightly but remain just below 40%. They previously highlighted that taxes will become a primary focus for fiscal policy starting next year, particularly with the expiration of certain provisions from the Tax Cut and Jobs Act at the end of 2025. The outcome of the election will determine which aspects of the tax cuts are extended and if new taxes are introduced.
In terms of fiscal policy forecasts under a Biden administration, Goldman Sachs provided some key figures. They estimate that Democrats are considering raising the tax rate for individuals earning $400,000 or more to 39.6%, up from the current rates of 35% or 37%. They also project an increase in the corporate tax rate to 28%, though they are doubtful that Congress would agree, suggesting a 25% rate is more likely, especially in contrast to Trump’s proposal to lower it to 20%. Furthermore, Biden is proposing a 5% tax on Social Security and Medicare for incomes above $400,000, raising it from the current 3.8%.
Should Harris secure the nomination, speculation regarding potential vice presidential picks includes Pennsylvania Governor Shapiro, North Carolina Governor Roy Cooper, Kentucky Governor Andy Beshear, or Arizona Senator Mark Kelly.