On the Coming Corporate Tax Hikes

Biden will reportedly propose an 8-year $2.25 trillion spending bill funded by raising corporate taxes over 15 years. This implies a cost to the S&P 500 of 8.9% of 2022 earnings in a quick top-down analysis. As of this writing markets are not concerned, perhaps because it has been anticipated, or perhaps because it is far from certain to be enacted in a divided Congress now that the pandemic emergency has cooled down. The S&P 500 equity risk premium is at its narrowest since the Global Financial Crisis, making stocks ripe for a long-overdue correction while this is debated and future plans for raising individual tax rates come into focus.