Demokraterne vil måske sætte virksomhedsskatten i vejret i USA, men det er ikke en given sag, da det kræver flertal i Senatet, skriver Morgan Stanley i en analyse. Men hvis Joe Bidens skatteudspil vedtages fuldt ud, vil det reducere S&P500 selskabernes indtjening med 9 pct., og en udvandet plan vil sænke indtjeningen med 4 pct. Omvendt ventes Joe Biden at stimulere investeringerne, og det vil kompensere for en øget beskatning.
Sizing Up Democrat Corporate Tax Proposals
Although U.S. presidential candidate Joe Biden has proposed an increase in corporate taxes, how likely are they to pass in their current form?
For more Ideas, visit, www.morganstanley.com/ideas
Current Episode Transcript
Welcome to Thoughts on the Market. I’m Michael Zezas, Head of Public Policy Research and Municipal Strategy for Morgan Stanley.
The Democratic National Convention continues this week.
You might recall our survey of investors on their views about the 2020 U.S. election. In that survey investors expressed concern that a Democratic win would pressure the stock market by enabling substantial tax increases. The concern is valid, but we think it’s overdone for a few reasons.
First, keep in mind that Democrats winning the White House is far from a sufficient condition to raise taxes. They likely must also take control of the Senate. The Republicans convention is next week, and their party platform is likely to affirm that they prefer corporate taxes to stay the same; hence a Democratic tax plan likely requires control of both the White House and Congress. Polls suggest this is a meaningful possibility, but far from a given.
Second, there’s likely to be a difference between the stated ambition of the party on taxes and what it can get done in practice. In a sweep, Senate control will come from key wins by moderates, building on the existing moderate cohort who helped swing control of the House of Representatives to the Democrats in the 2018 midterms.
This group is less likely to support the full array of tax hikes proposed by the Biden campaign. That’s important because Senate control is likely to be slim, and so losing the support of just one or two moderates can sink legislation, giving them the power to influence what it ultimately looks like. And that can have a big fundamental impact on investments.
Consider some work our accounting and valuation research team, led by Todd Castagno, recently published on the impact of the Biden tax plan. Full implementation could reduce S&P 500 earnings by 9%, but a watered down version, more in line with what we expect could get moderate Democratic Senate votes, would reduce earnings by only about 4%.
And that brings us to our final point: you can’t only focus on the tax side of Democratic policies. A 4% hit to earnings from tax increases doesn’t account for a number of factors that could easily offset this impact, such as a more aggressive spending agenda that outstrips taxes and increases aggregate economic demand in the short term. This is something we would expect in a sweep.
