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Goldman Sachs Warns Biden’s Tax Package Will Cut Earnings Growth

Stock MarketsApr 12, 2021 05:36AM ET
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© Reuters. Goldman Sachs Warns Biden’s Tax Package Will Cut Earnings Growth

(Bloomberg) -- Joe Biden’s tax hike proposals will deal a severe blow to corporate earnings growth next year, Goldman Sachs Group Inc (NYSE:GS). strategists warned, highlighting a headwind for U.S. equities following a rally that has pushed prices to record highs.

The U.S. president wants to raise corporate income tax to 28% and set a 21% minimum levy on global corporate earnings. The ambitious package is set to face resistance in Congress, before a potentially revised version goes into effect next year.

Goldman strategists including David Kostin estimate that in the unlikely scenario that no tax reforms are adopted, the S&P 500’s annual earnings per share will grow by 12% to $203 next year. However, full adoption of the Biden proposals would cut growth to just 5% or $190.

“Legislation will be heavily negotiated,” the strategists write, adding their current estimate for a 9% earnings per share growth assumes that taxes will rise.

The president plans to meet with a bipartisan group of centrist lawmakers on Monday as part of his pitch to support initiatives that he said would address inequality, strengthen the U.S. economy and rebuild the country’s infrastructure. Centrist Democrats like West Virginia’s senator Joe Manchin have said that the current tax proposal goes too far.

While global stocks have rallied on the expectation that economies will rebound as vaccinations against the coronavirus progress, cash-starved governments are under pressure to raise corporate taxes following an unprecedented spending spree to cushion the blow from the steepest recession in living memory.

The Biden administration has floated a proposal for a new international tax code that would hit as many as 100 global corporate giants with a levy on their revenue. A push by European Union members to tax more of the income on the countries where tech giants do business had been stalled, amid a pushback from Donald Trump’s administration.

 

 

Goldman Sachs Warns Biden’s Tax Package Will Cut Earnings Growth
 

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Comments (5)
Raymond Pasillas
Raymond Pasillas Apr 12, 2021 9:44AM ET
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People will do whatever they can to steal your money.
Jabie Bulie
Jabie Bulie Apr 12, 2021 8:08AM ET
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Typical democrats who want to steal our money ! Just like they steal elections !!
Zeb Fullmer
Zeb Fullmer Apr 12, 2021 7:33AM ET
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Biden doesn't even know his administration put this tax hike proposal out. He is still lost in his bedroom looking for his dentures.
Rick Baier
Rick Baier Apr 12, 2021 6:15AM ET
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Raised Corporate income tax. What do you think will happen to major companies? Workforce reduction guaranteed.
Rachid MELLITI
Rachid MELLITI Apr 12, 2021 6:15AM ET
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when the economy is bouncing back, it would be foolish to let go of people
Rachid MELLITI
Rachid MELLITI Apr 12, 2021 6:15AM ET
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when the economy is bouncing back, it would be detrimental to let go of people
Larry Deangelis
Larry Deangelis Apr 12, 2021 6:07AM ET
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If we learned anything over the last 12 years is that: Earnings don't matter in this ponzi scheme
 
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