U.S. President Joe Biden recently proposed a $2 trillion infrastructure plan, which also includes a plan to raise corporate taxes on U.S. companies. In this regard, Goldman Sachs analysts predict that Biden’s corporate tax plan will reduce the EPS of the S&P 500 companies by 9% next year.
According to the infrastructure plan proposed by Biden last week, the U.S. corporate tax rate will rise from 21% to 28%, reversing the corporate tax cuts of the Trump (Donald Trump) era. In addition, Biden’s proposed plan would also implement a minimum tax measure for multinational companies to deal with the phenomenon of companies hiding their profits in tax havens.
Goldman Sachs analysts estimate that Biden’s corporate tax season will reduce the S&P 500 EPS by 9% next year, of which the communications services and information technology may be the biggest impact because of the tax system, mainly due to the higher taxes on overseas business in these industries. The agency predicts that due to corporate tax and global tax rate increases, the EPS of these two industries next year will fall by about 10%.
In addition, the corporate tax hike will also have an impact on the technology community, which until recently has been the main force supporting the unprecedented rally in U.S. stocks. Savita Subramanian, head of U.S. equities and quantitative strategy at Bank of America, said technology stocks have been under pressure from rising borrowing costs this year, making the value of future cash flows lower, and the value of future cash flows is an important factor supporting the high share prices of technology stocks and corporate valuations.
Subramanian pointed out that these are higher risk industries in the market than previously.
However, Mike Mullaney, head of global market research at Boston Partners, said so far the market does not seem to be incorporating the tax hike. “Corporate taxes are going to go up, we just don’t know the magnitude of the increase,” Mullaney said. Mullaney said.
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