Goldman Sachs estimates Harris’ proposed tax reforms could hit S&P 500 earnings by 5%

(Reuters) – U.S. Vice President and Democratic presidential candidate Kamala Harris’ proposed corporate tax hike ahead of November’s presidential election could hurt profits at companies in the benchmark S&P 500 index by about 5 percent, Goldman Sachs analysts said.

Last month, Harris proposed raising the corporate tax rate from 21% to 28% and ensuring that “big corporations pay their fair share” if she wins the election against Republican rival Donald Trump.

Goldman estimated that with a 28% tax rate, S&P 500 companies’ profits would decline by 5%.

Adding a tax on foreign income and an increase in the alternative minimum tax rate from 15% to 21% could reduce profits by as much as 8%, analysts said.

On the other hand, Trump’s proposed cut in the federal corporate tax rate from 21% to 15% would “arithmetically” increase S&P 500 earnings by about 4%.

“The current statutory U.S. corporate tax rate on domestic income is 26%, but the total effective tax rate paid by a typical S&P 500 company is 19%,” the brokerage added.

Goldman projected that for every one percentage point change in the U.S. domestic statutory tax rate, the change in S&P 500 earnings per share (EPS) would be slightly less than 1%, or about $2 of S&P 500 EPS.

Harris’ rise to the top of the Democratic ticket has reinvigorated a Democratic campaign that had harbored doubts about Joe Biden’s chances.

Polls showed Trump pulling ahead of Biden, but Harris has since pulled ahead of the Republican nominee in some national opinion polls.

(Reporting by Roshan Abraham in Bengaluru; Editing by Nivedita Bhattacharjee)