Goldman Sachs believes that if Vice President Kamala Harris becomes the Democratic presidential nominee, her economic plans will largely mirror those of President Biden. This assessment comes in the wake of President Biden announcing that he will not seek the Democratic nomination after facing significant pressure to withdraw following a difficult debate performance against former President Donald Trump.
In a statement released shortly after his announcement, Biden endorsed Harris, who has expressed her intent to continue her campaign. She has also gained several prominent endorsements from figures such as California Governor Gavin Newsom, Pennsylvania Governor Josh Shapiro, and New Jersey Governor Phil Murphy. However, Goldman Sachs does not anticipate a substantial shift in policy direction.
Goldman Sachs analysts, led by Chief Economist Jan Hatzius, stated that they do not expect any meaningful changes to the Democrats’ fiscal and trade policy agenda if Harris secures the nomination. Following the endorsement, the likelihood of Democratic success in the upcoming presidential election increased slightly but remains just below 40%.
The analysts earlier indicated that taxation will take center stage in the upcoming fiscal discussions, particularly with the expiration of key provisions of the Tax Cuts and Jobs Act set for late 2025. The outcome of the election will determine whether any of the tax cuts will be prolonged or if new tax initiatives will be introduced.
Specific predictions from Goldman Sachs about potential fiscal policies under a Biden administration include:
– A proposed tax rate of 39.6% on individuals earning $400,000 or more, an increase from the current rates of 35% to 37%.
– A suggested increase in the corporate tax rate to 28%, up from 21%, although Goldman expressed skepticism that Congress would endorse this, predicting a more likely outcome of a 25% rate. In contrast, Trump has promised to reduce this rate to 20%.
– An increase in the Social Security and Medicare tax rate for incomes exceeding $400,000 from 3.8% to 5%.
Should Harris become the nominee, speculation regarding her vice presidential pick points to several governors, including Josh Shapiro of Pennsylvania, Roy Cooper of North Carolina, Andy Beshear of Kentucky, and Senator Mark Kelly from Arizona.