Biden's Tax Hikes Pose Greater Risk to Economy than COVID-19, Warns Goldman Sachs

Strategic Insights -

According to David Kostin, chief U.S. equity strategist at Goldman Sachs, tax policy may pose a larger risk to earnings and equity prices than the COVID-19 pandemic. The passage of Joe Biden's tax hikes would lower next year's S&P 500 per-share earnings by $20 to $150. Biden's proposed tax increases would significantly impact American households, including raising the corporate tax rate to 28 percent, imposing a 40 percent capital gains tax, and eliminating step-up in basis.

Key Takeaways:

  • The Biden tax plan, combined with an expected drag on GDP, would lower next year's S&P 500 per-share earnings by $20 to $150.
  • A family of four earning the median income of $73,000 would see a $2,000 tax increase each year.
  • A single parent (with one child) making $41,000 would see a $1,300 tax increase each year.
  • The proposed corporate tax rate of 28 percent would give the U.S. a higher corporate rate than Communist China.
  • Millions of low and middle-income households would be stuck paying the Obamacare individual mandate tax.
  • Small employers will face tax increases due to the increase in marginal income tax rates and the repeal of the TCJA 20% deduction for small business income.
  • Taxes would rise in every state and every congressional district.
  • The Death Tax would ensnare more families and businesses.
  • Utility bills would go up in all 50 states as a direct result of the corporate income tax increase.
  • The AMT would snap back to hit millions of households.
  • Every household claiming the child tax credit will see their child tax credit cut in half, resulting in an income tax increase.
  • Every household that claims the standard deduction will see it cut in half, resulting in an income tax increase.

Statistics:

  • Goldman Sachs estimates that Joe Biden's tax hikes may pose a greater risk to the economy than the coronavirus.
  • The S&P 500 per-share earnings could be lowered by $20 to $150 next year.
  • 82 percent of middle-income earners received a tax cut in 2018, averaging about $1,050.
  • A family of four earning $73,000 would see a $2,000 tax increase each year.
  • A single parent (with one child) making $41,000 would see a $1,300 tax increase each year.

Sources:

  • Fox Business: "Goldman Sachs: Biden's tax hikes pose greater risk to economy than coronavirus."
  • CNN: "Goldman Sachs warns that Biden's tax plan would lower S&P 500 earnings."
  • Americans for Tax Reform (ATR): "Biden's Tax Hikes Pose Greater Risk to Economy than COVID-19, Warns Goldman Sachs."
  • New York Times: "Most people got a tax cut."
  • Washington Post: "Most Americans received a tax cut."
  • CNN: "The facts are, most Americans got a tax cut."
  • FactCheck.org: "Most people got some kind of tax cut in 2018 as a result of the law."
  • FactCheck.org: "The vast majority (82 percent) of middle-income earners … received a tax cut that averaged about $1,050."