The Democratic Party's Tax Proposals Could Shake Up Financial and Real Estate Sectors
The Democratic Party's proposed tax provisions are causing a stir in the financial and real estate sectors, with TD Cowen analysts warning of significant implications. These measures, though not new, are gaining relevance as the need for tax legislation looms in 2025. Key proposals include raising the corporate tax rate to 28%, doubling the tax rate on foreign earnings to 21%, and increasing the stock buyback tax from 1% to 4%.
The increase in the stock buyback tax is expected to raise $166 billion, impacting banks directly as regulators prefer buybacks over dividends for capital returns. Additionally, the elimination of like-kind exchanges in real estate could deter investor interest in commercial and residential properties, raising around $20 billion.
Analysts consider the majority of tax provisions in the Democratic platform as "relevant" and believe there is a pathway for these measures to advance next year. Regardless of the election outcome, the party is likely to pursue these demands. The need to offset the $4.5 billion cost of extending the Trump-era tax cuts has put various ideas in play, including treating capital gains as ordinary income, potentially raising $289 billion.
Banks, facing higher average tax rates than other sectors, would feel the impact of the proposed increase in the corporate tax rate, expected to generate $1.3 trillion in revenue. Overall, these tax proposals could reshape the financial landscape and real estate market, affecting investors, businesses, and the economy at large. Stay informed and be prepared for potential changes in the tax landscape.