S&P 500 companies are expected to see a dent in their earnings under Democratic presidential front-runner Elizabeth Warren’s plan to raise taxes on corporations.
Warren, a senator from Massachusetts, has promised to repeal the corporate tax cuts signed by President Trump in 2017. But doing so, Goldman Sachs warned in a note to investors Friday, will cut S&P 500 earnings by 11%.
“Every one percentage point increase in effective tax rate translates into a roughly 1% decrease in S&P 500 earnings per share,” David Kostin wrote in a note.
Raising the effective tax rate from 18% to 26% would lessen the bank’s 2021 S&P 500 earnings per share estimate by roughly 11%, he and his team said.
Warren and her Democratic presidential rivals have made the tax reform package passed by the GOP-controlled Congress a punching bag and vowed to roll back provisions of the law if elected.
In addition to raising the corporate tax rate, Warren’s plan unveiled a tax that would apply to companies that report more than $100 million in profits. Under the Massachusetts senator’s “Real Corporate Profits Tax,” corporations would pay a 7% tax on every dollar above the $100 million.
Warren said that the new tax would ensure large companies cannot take advantage of loopholes in the tax code that lessen their tax burden.
“To raise the revenue we need — and ensure every corporation pays their fair share — we need a new kind of tax that big companies can’t get around,” Warren wrote in April.
Among the large field of Democratic presidential hopefuls, Warren has surged to second behind former Vice President Joe Biden, according to a polling average from Real Clear Politics. But a New York Times/Siena College poll of likely Iowa Democratic caucuses voters released Friday had Warren leading.
