S&P 500 Spared From Big Tax Hikes
Wall Street, after winning big with President Trump's 2017 tax cuts that cut the corporate income tax rate to 21% from 35%, has largely escaped a big payback under President Biden. That's not for lack of trying.
Biden sought over $2 trillion in tax hikes aimed at corporations and wealthy investors. Hiking the corporate tax rate back to 28% would have raised $900 billion. Biden proposed hiking the top tax rate on capital gains and dividends to 43.4% from 23.8%, raising $400 billion. Tax hikes on foreign corporate income might have raised $1 trillion in the first decade.
But with every Democrat in the 50-50 Senate owning an effective veto, Sen. Joe Manchin relentlessly squashed down Biden's wish list from well over $2 trillion to an estimated cost of $430 billion. Worried that more government profligacy would exacerbate the inflation threat, Manchin recrafted the bill as the Inflation Reduction Act.
In a worst-case scenario, Wall Street strategists said $S&P 500 Index (.SPX.US)$ earnings could take an 8% haircut, but figured a hit of 3%-4% was more likely. In the end, Goldman Sachs estimates that S&P 500 earnings will be trimmed by about 1.5%. The buyback tax will pare earnings 0.5% and the 15% minimum corporate tax 1%.
The corporate minimum tax targets big companies like $Amazon (AMZN.US)$, which paid a 6% tax rate on U.S. income in 2021. Yet even that provision was shrunk down in 11th-hour negotiations, which preserved the tax advantage of accelerated depreciation for equipment purchases. $Citigroup (C.US)$ analysts think the 15% minimum tax will cut earnings by just 0.4% next year. $SPDR S&P 500 ETF (SPY.US)$ $Invesco QQQ Trust (QQQ.US)$
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Violets : all of our taxes were better just saying
Giovanni Ayala :
Indicator analyst OP Giovanni Ayala :![[undefined]](https://static.moomoo.com/nnq/emoji/static/image/default/default-black.png?imageMogr2/thumbnail/36x36 "undefined")
Indicator analyst OP Violets : really
Giovanni Ayala Indicator analyst OP : GoodMorning
Violets Indicator analyst OP : yup. I paid the lowest taxes in my life in 2017 and 2018. the lowest Federal taxes ever. I was living in Hawaii so my state taxes were high very high.
Giovanni Ayala : Delaware has No Taxes
102175775 : if the effective tax rate only affects less than 1pct or 0.5 pct of corporate earnings, then the govt is in big trouble. the budget deficit just grow bigger. and if govt finance part of it by printing more money, the issue of hyper inflation will continues.
DanielVillarreal : experiencing pain at the pump by waiting to implement a 5.6% tax hike
Lana Su : Is that fair? Please think of Biden more for the citizens.