Goldman Sachs has indicated that if Kamala Harris becomes the Democratic presidential nominee, her economic policies are unlikely to differ significantly from those of President Biden. This assessment comes on the heels of President Biden’s announcement on Sunday that he would withdraw from the race for the Democratic nomination due to escalating calls for him to step aside following a lackluster debate performance against Republican candidate Donald Trump.
Biden has since endorsed Vice President Kamala Harris, who expressed her commitment to continue her campaign. She has garnered several high-profile endorsements, including support from California Governor Gavin Newsom, Pennsylvania Governor Josh Shapiro, and New Jersey Governor Phil Murphy. Nevertheless, Goldman Sachs believes this change in leadership will not result in a dramatic shift in policy direction.
According to Goldman analysts, led by chief economist Jan Hatzius, they do not foresee significant changes to the Democrats’ fiscal and trade policy agenda should Harris become the nominee. The firm estimates that the odds of Democrats winning the White House have increased slightly but remain just below 40%.
Goldman Sachs had previously predicted that tax policy would take center stage in the coming year, especially with the end of the personal income tax provisions of the Tax Cuts and Jobs Act approaching in 2025. This will present the next administration with the challenge of deciding on the extension of tax cuts and potential new taxes.
The firm’s fiscal policy forecasts under a potential Biden victory include a proposed tax rate of 39.6% for individuals earning $400,000 or more, an increase from the current 35%/37%. Additionally, they project a corporate tax rate of 28% under Biden, up from 21%, although they express skepticism that Congress would approve this higher rate, suggesting a more realistic outcome might be around 25%. In terms of Social Security and Medicare, Biden has proposed raising the tax rate on incomes over $400,000 from 3.8% to 5%.
If Harris secures the nomination, prediction markets have suggested that potential candidates for the vice presidential slot might include Governors Shapiro, Roy Cooper from North Carolina, Andy Beshear of Kentucky, or Senator Mark Kelly from Arizona.