Biden has proposed setting a minimum tax rate that businesses should pay at 15%, two sources familiar with the matter said, in what would be a major concession from the Democratic president as he struggles to strike a deal with the Republicans.
In return, Republicans are expected to agree to at least $ 1 trillion in new infrastructure spending, against the president’s initial proposal for a $ 2.25 billion package.
“To set these rates at 15 percent, I think it would be great for the market,” said Gary Bradshaw, portfolio manager at Hodges Capital Management in Dallas.
Raising the global minimum rate on foreign income of U.S. corporations to 21 percent from 10.5 percent and the corporate tax rate to 28 percent from 21 percent, among other Biden tax proposals, would reduce profit per share of about 7.6 percent the next time around. year, Morgan Stanley said Monday.
Headlines on Biden’s proposal led the S&P 500 to cut losses by about half of 1%, although the market still closed lower.
Investors would welcome a compromise that would allow the infrastructure and the tax package to pass through Congress, said Rick Meckler, partner at Cherry Lane Investments in New Vernon, New Jersey.
“The alternative is the possibility of a much more extreme package voted only by Democrats,” Meckler said.
Rob Sechan, managing partner and co-founder of Newedge Wealth in New York City, said anything below the expected 28% tax hike will help the market.
“The tax structure has now changed from a headwind to a tailwind,” he said.
A 28% corporate tax rate would have a huge impact on profits, although the likelihood of a compromise is unlikely, said Thomas Hayes, chairman and managing member of the Great Hill Capital LLC hedge fund in New York City.
“There is a higher likelihood that Democrats will push through whatever they want,” Hayes said.