Biden Wants Corporations to Pay Their Fair Share of Taxes. These Sectors Would be Hit Hardest.

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The 2020 presidential race is heating up ahead of next month’s conventions. If polls mean anything, former Vice President Joe Biden is currently the front-runner. But stocks don’t completely reflect his lead in recent weeks.

While prediction market-based pricing suggests a Democratic sweep, options, and equity market indicators signal much uncertainty. Stocks that would be sensitive to Biden’s tax plan, for example, haven’t traded in tandem with his improved standing in polls.

If Biden wins and is able to pass his proposals, his tax plans will have a direct impact on the corporate earnings for a number of S&P 500 companies excluding real-estate companies and those domiciled outside of the U.S. In a speech earlier this month when Biden launched his $700 billion “Buy American” plan, he said, “It’s time corporate America paid their fair share of taxes.”

What exactly is a fair share in Biden’s eyes? David Zion, the founder of Zion Research Group, set out to quantify just that. Zion wrote in a research note on Monday that he estimates effective tax rates for those S&P 500 companies will go up by an average of 8 percentage points if Biden increases the statutory corporate tax rate from 21% to 28%and doubles the global intangible low tax income rate to 21%. That would have resulted in a 10%, on average, hit to reported 2019 earnings, according to Zion.

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