But the race is on The white house The year 2024 is witnessing a unique paradox, as it turns into a very important financial event, as the largest companies in the United States face two completely different financial futures, separated by a huge amount of “a quarter of a trillion dollars” annually.
According to a report prepared by the “Financial Times” and viewed by the “Eqtisad Sky News Arabia” website, the “quarter of a trillion dollars” figure is due to the different tax policies of the candidates Kamala Harris and Donald Trump, and is based on estimates by the National Bank of… Goldman Sachswho pointed out that Trump’s proposal to reduce the corporate tax rate from 21 percent to 15 percent if he wins, would add 4 percent to the profits of the Standard & Poor’s 500 index, while Harris’ plan to raise the corporate tax, from 21 percent to 28 percent, in addition to its other corporate tax proposals, would reduce profits by 8 percent.
While the profits of the Standard & Poor’s 500 Index are expected to reach about $2.2 trillion in the year 2025, the 12 percent difference between the impact of the policies of the presidential candidates and what produces an amount of approximately a quarter of a trillion dollars explains why major companies are interested in protecting their gains. resulting from the results of these elections.
Two completely different paths
The path he will adopt Trump In his dealings with companies, if he returns for the second time to the White House, he will be a continuation of what he began during his first term, when in December 2017 he signed the tax cut law, which is considered the most comprehensive reform of the American tax system in an entire generation, as he reduced the corporate tax by The ratio is 35 percent to 21 percent. Trump also stopped imposing taxes on profits made by American companies abroad and returned to the United States.
For her part, Kamala Harris attacked during her election campaign the tax cut law passed during the Trump era, describing it as a gift to billionaires and companies, noting that it failed to meet the requirements, and promised to correct the course of matters by raising the tax again.
Controversial law
The tax cut law remains one of the controversial points in America, as some studies indicate that the overall result of the law helped companies achieve a quick and permanent profit in recent years, as these companies benefited from the huge amounts of money they had achieved, and carried out stock buybacks, instead of… Investing in expanding its business in the country. According to the Financial Times, data shows that the value of stock repurchases jumped above $800 billion across the Standard & Poor’s 500 index for the first time in 2018 and has remained high since then.
On the other hand, economic modeling conducted by experts from the Republican and Democratic parties, in addition to independents, found that the tax cut law led to an expansion of capital investment in the United States by 20 percent, while a study conducted by a team of academics led by Javier Garcia Bernardo from Utrecht University found Companies such as Alphabet, Microsoft, Qualcomm, Meta, Nike, and Cisco transferred intellectual property to the United States of America from other countries following the passage of this law.
Companies opinion
CEOs of companies from General Motors, AT&T, Qualcomm and Amazon say the tax cut was a contributing factor in decisions about building new factories or making other long-term investments in the United States.
Earlier this month, Joseph Wolk, Johnson & Johnson’s chief financial officer, said that the “fair” tax rate of 21 percent was a contributing factor in the company establishing a new drug supply facility in North Carolina. NBC pointed out that if the corporate tax rate rises to 28 percent, it will be very difficult to locate this facility in America.
Rohit Kumar, who co-leads the national tax practice at PricewaterhouseCoopers and advises corporate clients on the potential outcomes of the US elections, reveals that there is no way to describe what is happening in the US presidential election other than as an “important financial event,” with There is a big difference between what will happen if the Democrats sweep or the Republicans sweep, indicating that companies in America are reluctant to make major investments, because the result of the November 5, 2024 elections will have major impacts on rates. Taxes, as companies will not be able to know the extent of their impact until the results become clear.
Interwoven events
Most observers expect that American lawmakers will reconsider tax rates in 2025. However, predicting the outcome of what the elections will lead to is risky, given the complex mix of events, as we must also wait for what the outcome of the new Congress, which will also be elected, will lead to. On November 5, we will know the identity of the party that will control the council seats, and which will have a role in approving the reduction or increase of corporate taxes.
On November 5, 2024, Americans will not only go to the polls to elect a new president for the country, but on the same day, 469 members of Congress will also be elected for its two chambers, the Senate and House of Representatives, as the struggle rages between the Republican and Democratic parties to win the largest number of seats in this year’s elections. , to control Congress in its 119th edition.
Candidates’ priorities shift
In an interview with the “Eqtisad Sky News Arabia” website, FxPro’s chief financial markets analyst, Michel Salibi, says that the 2024 US presidential elections have already turned into an important financial event, not only for large companies, but for all types of companies and various sectors. Usually, and throughout history, the presidential race has been The White House is witnessing intense interest in political and economic topics, which focus on consumer spending and the well-being of individuals, and how to improve their conditions, but recently the interest of presidential candidates has become different from before, as We have begun to see a focus on economic wars and the tools that can be used in this field.
Salibi explains that this shift in the candidates’ priorities is due to the change in the way the economy grows in America in general. The endless competition between the United States on the one hand and China and the major economies on the other hand, in addition to the risks resulting from the possibility of the collapse of industries and economic sectors in favor of competitors, makes it necessary for America to Taking measures to maintain its leadership of the global economy, indicating that the economic proposals of both Harris and Trump will have a significant impact on the performance of companies in the country.
Trump’s victory will be a relief to companies
According to Salibi, Trump’s policy, in which he tends to reduce interest rates and tax rates, will have direct and significant positive effects on American companies and stocks. Trump believes that keeping taxes low will support companies, which in turn will reflect positively on the economy, pointing out that the latter’s victory in the presidency It will have positive repercussions that will improve the economic wheel, while Harris’ economic aspirations seem different, and focus on following Biden’s policy, in terms of the US Federal Reserve taking interest-reducing decisions, based on monitoring inflation levels and data. Jobs.
Salibi believes that Harris is planning to raise the corporate tax in a violent manner, but her accession to the presidency will benefit certain sectors, specifically companies working in the field of clean energy. He considers that Trump’s victory, in general, will relieve major companies, but not all matters can be measured from one perspective. The arrival of Trump or Harris to the White House, which will result in some restrictions that will reflect negatively and indirectly on the performance of major companies, especially technology companies.
Do companies influence voters?
Salibi stressed that it is natural for clean energy companies to prefer the arrival of Harris over Trump, as they are supportive of this industry, while traditional energy companies will prefer the arrival of Trump, as he is supportive of their business, stressing that companies have the ability to influence voters’ attitudes, as there are several CEOs who With clear campaigns in support of the arrival of a specific candidate, including the billionaire owner of the
The best corporate president
The head of the global markets department at Cedra Markets, Joe Yarak, had revealed in a previous interview with the “Eqtisad Sky News Arabia” website that it is known that the corporate and business sector in America always prefers the Republican president over the president who represents the Democratic Party, as companies believe that the arrival of… Republicans to the presidency create a better working environment than the arrival of Democrats, who are very strict in enforcing the rules, pointing out that Harris’ economic performance will not be different from Biden’s performance, while President Trump, being a Republican and coming from a businessman background, has more orientations. Leniency regarding applicable regulations and laws, unlike Democrat Harris.
Yarak added that President Trump reduced the corporate tax in America during his previous term, and if he returns to power again, he promised to reduce it again, and in return, Harris will raise it, indicating that a large portion of bankers support Trump’s arrival because he will be more lenient in dealing with… This sector, compared to Harris, will complement Biden’s hard-line approach, by implementing regulations and compliance regulations, as the rules set by Biden during his reign cost the banking sector billions of dollars.
