Political races further down the ticket are significant, too, as the balance of power in the Senate will influence the extent to which the next president, whether it is Democrat Joe Biden or incumbent Republican Donald Trump, can accomplish his agenda.
Investor anxieties about politics are running high in an election year already fraught with tension amid the economic damage from the coronavirus pandemic, which triggered enormous market swings earlier in 2020. However, David Eiswert, portfolio manager of the Global Focused Growth Equity Strategy, contends that many postelection policy and regulatory risks "came off the table" after Biden, considered more of a moderate Democrat compared with his chief competitors, emerged as his party's presidential nominee.
Stark Contrast in Tax Policy
Taxation illustrates one of the widest policy divergences between the two candidates. Biden has proposed raising corporate taxes to halve the tax cut enacted by the Tax Cuts and Jobs Act (TCJA) of 2017, which was a key policy victory for the GOP. Biden's plan would involve increasing the corporate income tax rate—currently a flat 21%—to 28%. That would still leave the rate meaningfully lower than the pre‑TCJA rate of 35%. The Democratic candidate would also boost taxes on the foreign income of US companies and institute a form of alternative minimum tax for corporations.
Biden has earmarked his tax proposals as revenue‑raisers for his spending plans, which include funds for research and development, education, health care, and child‑care. According to a Penn Wharton Budget Model analysis of Biden's spending and taxation policies,1 the new outlays would total USD 5.4 trillion over 10 years versus USD 3.4 trillion in new revenue, potentially resulting in USD 2 trillion in deficit‑financed spending in the next decade.
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