Trump Versus Harris: Corporate Tax Winners and Losers

Michael LebowitzAdvisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.

Not surprisingly, Donald Trump and Kamala Harris are floating opposite approaches to modifying the corporate tax code. If enacted, both proposals would significantly impact corporate profits and, thus, share prices. Currently, the plans are only campaign promises. And history reminds us repeatedly that many political promises are meant to drum up votes. Few get enacted.

“Read my lips, no new taxes.” – George H.W. Bush, 1988.

Predicting whether Trump or Harris will be the next president is challenging. Moreover, even if you know who will win, it’s even trickier to assess which legislation they will focus on and which bills can get through Congress.

Markets handicap unknown scenarios all the time. In some cases, stock prices can move violently as the odds of an event occurring change. Since corporate taxes may be the most significant short-term political factor affecting stock prices, it’s worth understanding what both candidates propose, allowing us to try and stay a step ahead of the market handicappers.

Furthermore, with the recent history of Donald Trump’s 2017 corporate tax cuts, I quantify which companies are best suited to take advantage of or be penalized by a change to the tax code.

Current corporate tax code and history

The following graph charts the Federal corporate tax rate and the effective tax rate companies have actually paid since World War II. Trump’s 2017 Tax Cuts and Jobs Act (TCJA) reduced tax rates from 35 percent to 21 percent. The only other significant cut in America’s history of corporate taxes was in 1986, when President Reagan reduced them from 46 percent to 34 percent.

official and effective

Like personal taxes, there are many loopholes for corporations. Thus, the effective tax rate can vary widely by company. Evaluating how tax rates affect corporate bottom lines in the aggregate is important, but it can be critical at a company level.

This article only addresses the proposals from the point of view of corporate profits. We do not opine on how they could impact the deficit or economy.