Good morning. Before we get to the news, please take a moment to remember those who lost their lives on September 11, 2001.

This is a significant day to honor — regardless of your political leanings.

Appreciate you all being here each morning.

Now let’s get started.

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Presidential taxes

Intriguing as the Trump-Harris debate proved, it did not entirely clarify the former president’s or current VP’s vision for taxing American businesses. 

As politicians tend to do, the barbs and boiler-plate rhetoric prevented a clear discussion on policy and data.

That said, both candidates acknowledge that inflation and cost-of-living are becoming untenable, though they diverge on how they intend to spur economic growth. 

The chart below shows how each wants to change the corporate tax rate, which currently sits at 21%. 

Harris wants to hike that by about one-third to 28%, while Trump wants to lower it by 28.5% to a 15% rate. 

According to Gavekal Research, a more realistic proposal for Trump hovers closer to 20%, given the potential gridlock in the House or Senate. 

In his first term, he led the charge in lowering the corporate tax rate to the current level. 

Theoretically, a lower corporate tax allows companies to deploy their own capital more effectively, making the business more competitive and raising share prices.

This in turn should attract more investments into these businesses. 

Goldman Sachs analysts estimate that dropping to a 15% corporate tax rate could “arithmetically” boost S&P 500 earnings by roughly 4%. 

Tax hikes, on the other hand, have the opposite effect.

The bank forecasted that Harris’ plan could reduce S&P 500 company earnings by roughly 5%. 

Using data from the Tax Foundation, we produced the following chart illustrating how economic growth — as measured by GDP — could fluctuate depending on the corporate tax rate.

Harris, for her part, has defended her position by saying this is one way to ensure “big corporations pay their fair share.” 

What’s your take on the corporate tax proposals from Trump and Harris? Hit reply to this email or let me know on X @philrosenn.

Elsewhere:

📊 Inflation is due this morning. Economists expect August CPI to climb 0.2% compared to the prior month, according to FactSet estimates. That would bring the annual inflation rate down to 2.6% from 2.9%. A cooler print would provide reassurance for the Fed, which is still weighing whether to cut rates by 25 or 50 basis points next week. (Morningstar)

🏦 Big banks face big changes. US regulators plan to make sweeping changes to their bank-capital rules proposal. If the new rules hold, lenders like Bank of America, JPMorgan, and other Wall Street mainstays will see the intended 19% hike in required capital cut to 9%. The boost in holdings is meant to better cushion against financial shocks. (Bloomberg)

📉 JPMorgan stock tumbled Tuesday. The president of the largest US bank tempered the forecast for its earnings from interest payments, saying that it’s prior estimates may have been too optimistic. Shares dropped as much as 7% on the day. (CNBC)

Rapid-fire:

• Oracle stock surged 11% after reporting strong AI demand and above-expected earnings (Investor’s Business Daily)

• Brent crude dropped below $70 a barrel to hit its lowest level since December 2021 (Yahoo Finance)Europe’s top court ruled that Apple must pay 13 billion euros in back taxes for a case dating back to 2016 (CNBC)

• The European Central Bank will likely deliver another rate cut Thursday (Bloomberg)

• JPMorgan CEO Jamie Dimon said stagflation would be the worst outcome — and it’s still on the table (CNBC)

• How Trump and Harris differ in their plans to unfreeze the US housing market (Bankrate)

Last thing:

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