Corporate profits

Landmark climate and health care bill won’t crush corporate profits, Goldman Sachs says

To pay for historic climate investments, legislation passed in the Senate on Sunday imposes a minimum corporate tax of 15% and a 1% tax on stock buybacks.

But the impact of these tax provisions will be minimal, according to Goldman Sachs (GS). The buyout tax and minimum corporate tax will reduce earnings per share next year among S&P 500 companies by just 1.5%, according to a Goldman Sachs analysis released early Sunday.

Businesses that pay low effective tax rates — such as healthcare and technology companies — would be hit harder, the bank said.

Overall, Goldman Sachs said the net fiscal impact of the Cut Inflation Act “appears very modest,” translating to less than 0.1% of GDP over the next few years. That’s because new spending and new taxes “roughly offset it,” the bank said.

Citigroup (VS) echoed that sentiment, saying the minimum tax and buyout elements of the legislation will have “minimal impact” on S&P 500 earnings. Citi’s first reading, the bank said, is that the tax minimum of 15% will negatively impact consensus earnings estimates of just 0.42% for 2023 – and even that estimate could “overestimate” the impact.

CEOs step in

The results contrast with warnings from some major business groups who have argued that the new tax provisions will backfire.

The Business Roundtable, an influential CEO lobby, said in a statement on Saturday that while it supported the bill’s policies to encourage clean energy, the corporate minimum tax would suppress domestic investment and “undermine the competitiveness of US exporters”.

“Imposing more than $300 billion in tax increases during a recession is the wrong policy at the wrong time,” Business Roundtable CEO Joshua Bolten wrote in the statement, noting that the US economy has faced to two consecutive quarters of falling GDP and “remains at risk”. of a prolonged economic decline.”

The American Petroleum Institute, the largest oil and gas trading group, said this weekend it was “encouraged” by the extension and expansion of carbon capture tax credits and provisions on onshore and offshore lease sales.

However, API said much-needed permit reform was “conspicuously absent” from the bill and criticized its tax provisions.

“We remain opposed to policies that raise taxes and discourage investment in U.S. oil and natural gas,” said API CEO Mike Sommers.