Goldman Sachs: U.S. tax hikes could hammer Apple, other ‘Big Tech’ stocks

The FAAMG stock complex [Facebook, Apple, Amazon, Microsoft and Google] has been one of the best investments of the past five years amid advances in technology that have powered massive bottom line gains for the Big Tech, but proposed U.S. tax hikes could harm that calculus.

stocksBrian Sozzi for Yahoo Finance:

But the heady quarterly earnings gains for the likes of Facebook, Apple, Amazon, Microsoft and Google that investors have come to know and love may be at risk of a sharp cool-down if the Biden administration’s various tax hikes kicks in next year, Goldman Sachs chief U.S. equity strategist David Kostin warns.

The Biden administration is seeking to lift the corporate tax rate to 28% from the Trump-era’s 21%… [and] is also readying to increase the capital gains tax on the wealthiest Americans to 43.4%, including a surtax to help fund infrastructure investments. The current capital gains tax stands at a top rate of 23.8%, which has been in place since Jan. 1, 2013.

Kostin says FAAMG stocks are also vulnerable to any increase in the capital gains tax.

“If the capital gains tax rate becomes set to rise in 2022, investors subject to the higher rate may choose to realize some of their substantial capital gains in 2021 at the lower current tax rate. The FAAMG stocks have appreciated by $5 trillion during the last 5 years, accounting for 29% of the S&P 500 market cap increase during that time,” Kostin explains. “The proposed tax reform plans by President Biden would raise both corporate and capital gains tax rates and represent possible sources of risk for the FAAMG stocks.”

MacDailyNews Take: Plans and proposals are not passed bills signed into law.

19 Comments

  1. Quelle horreur! The tax rate might return to what it was a few years ago when rich people were making money hand over fist. Six months after this passes no one will know the difference.

    1. Rich people always make money hand over fist, by definition.

      Corporations don’t pay taxes, they pass them on to you.

      If it does pass, in six months or so, you’ll be pining for the return of Jimmy Carter.

      1. And there is the true fallacy by not completing the thought.
        They indeed pass the taxes to you, but they NEVER pass the tax break to you.

        Also skews the Law of Supply and Demand by rewarding higher prices. So keep Trumping the Reagan BS.

        1. Corporations do pass the tax breaks to you by not raising prices to cover increased taxes and, as Apple and many other companies did with President Trump’s Tax Cuts and Jobs Act of 2017, by repatriating huge sums that are paid directly to shareholders — including “regular people” in their 401Ks — via dividends and indirectly via buybacks.

    2. You’re a fool.

      Listen not to CNN or MSNBC. Listen to Thomas Sowell:

      “The real goal should be reduced government spending, rather than balanced budgets achieved by ever rising tax rates to cover ever rising spending.”

      “In liberal logic, if life is unfair then the answer is to turn more tax money over to politicians, to spend in ways that will increase their chances of getting reelected.”

      “Some people say that taxes are the price we pay for civilization. But the runaway taxes of our time are the price we pay for being gullible.”

      “High tax rates in the upper income brackets allow politicians to win votes with class warfare rhetoric, painting their opponents as defenders of the rich. Meanwhile, the same politicians can win donations from the rich by creating tax loopholes that can keep the rich from actually paying those higher tax rates – or perhaps any taxes at all. What is worse than class warfare is phony class warfare. Slippery talk about ‘fairness’ is at the heart of this fraud by politicians seeking to squander more of the nation’s resources.”

      “Someone once said that taxes are the price we pay for civilization. That may have been true when he said it, but today taxes are mostly the price we pay so that politicians can play Santa Claus and get reelected.”

      “People who thing that they are getting something for nothing, by having government provide what they would otherwise have to buy in the private market, are not only kidding themselves by ignoring the taxes that government has to take from them in order to give them the appearance of something for nothing.”

      1. Thomas Sowell….

        Yep. Profoundly simple and direct economics…w/o the destructive boom/bust cycles that result from habit of using other’s wealth to feed the/a political narrative.

    3. No one says the rich or large corporations should not pay taxes. The last administration lowered the corporate tax rate from 39% to a more competitive 21%.

      A high U.S. corporate tax rate will reduced U.S. competitiveness and encouraged corporations to shift profits abroad and in some cases to “invert,” i.e., move headquarters to a foreign jurisdiction to avoid U.S. tax liability. Smart money moves to safe investment zones.

      Hong Kong Capital gains tax is 0%
      Hong Kong Corporate tax rate is 8.25-16.5%
      Main Land China Business Tax Rate 15% (not to mention vast armies of slave labor, almost zero enviro regs, and government sponsor of technology theft)
      United Arab Emirates Income tax: 0%
      Ireland corporate tax rate: 12.5%
      Switzerland corporate tax : 17.9%
      UK corporate tax : 19%
      Russia, Taiwan, Sweden: 20%
      The Bahamas, Cayman Islands, Bahrain, United Arab Emirates : capital gains tax: 0%

      Boodens Idea is counter productive and threatens to hurt the people he claims to help; He is killing the goose that lays the golden eggs. He seems to want to make the USA less competitive with one of the highest corporate tax rates on the planet. At the same time of rising the corporate tax he also is gonna hit business with higher energy cost and costly environmental regulations (three things that corporations under the CCP will not face. Tell us how USA companies compete against CCP CHINA corporations that unfair advantages; access to slave labor, gross environmental regulations, Intellectual Property theft. Who is Biden really helping ?

      Dose it make sense to tax investments so much higher than the rest of the world? Are we not part of a global economy? At some point it makes sense for big money to pack up and leave?

      “Capital Gains increase via Biden American Families Plan:
      Thirteen states and the District of Columbia would have a top combined capital gains tax rate north of 50 percent. California, New York, and New Jersey would have combined rates of more than 54 percent. Top combined rates in some localities would go even higher. For example, New York City levies a local capital gains rate of 3.876 percent, which means an investor would pay an all-in rate of nearly 58.2 percent. Residents of Portland, Oregon would face a top capital gains rate of 57.3 percent.”

      58.2 percent ! let that sink in. Hong Kong Capital gains tax is 0%.

      Biden says his plan will only raise the capital gains tax only on families/individuals making over 400K/year. Which he says will not effect anyone invested in the market making under 400k/year, since by Bidden’s own admissio the top 1% have most of the investment wealth in the market. So the little guys may not be directly effected by the higher tax rate. But the little guy will be effected by lower stock prices and mass exodus of good jobs leaving for greener fields; When the big dogs move their money and investments to financially safer places (and they always will) then the little dogs will be left holding the bag

      Dose anyone remember when Trump lowered corporate tax rate and Apple brought back almost 300 billion to the USA economy.

      https://www.nytimes.com/2018/01/17/technology/apple-tax-bill-repatriate-cash.html

      yes Biden has a plan for American families but its not what you are being sold.

      1. Apple didn’t return its overseas cash because the tax rate was lowered. The pre-Trump rate on cash held overseas was zero. The Trump tax bill imposed a new 15.5% tax on overseas cash whether it was repatriated or not. Once the tax was paid, there was no inducement to bring it home. Apple chose to do so for reasons unrelated to tax policy.

        Most other countries have a lower income tax rate than the US because they have a national Value Added Tax that generates the bulk of their revenue. ALL of that tax is paid by businesses, although they do pass much of it through to consumers, just like corporate income taxes. Thanks to being bombed flat in 1939-45, most other countries have much less aging infrastructure to maintain than the US. The average American is taxed to maintain 68 times as much per-capita road mileage as

        1. Road mileage as the average Hong Kong resident. Somebody has to pay for maintaining, repairing, and eventually replacing all those roads and bridges. If not those with the greatest ability to pay, then who?

          The fundamental problem with the low taxes = prosperity argument is that it is not historically true. The highest rates in American history were during the Eisenhower administration, which is also when real wages were rising the fastest.

          1. Implying the cause/effect of higher taxes and robust wage gains is naive. Add into the mix, we were still on the gold standard and therefore, there was still a force keeping wallets in the politician’s pockets. The Fed hadn’t started their dedicated involvement in the system that confusingly creates ongoing boom and busts, simmered by inflation.

            Most importantly, the factors above hadn’t yet spawned the massive chasm between those with wealth and those w/o. This factor “requires” half of the population to receive some sort of subsidy and, or are not taxed. We’ve created the need for higher and higher taxes and have steadily promoted the hand-out culture.

            We could learn a lot from the economically free-ist country…Singapore requires citizens to save a portion of their income for their own “social security” and for medical needs
            The country is committed to free education, but demand success in return. A free education is based on merit. Huh? What a novel idea. Here in American, a merit based anything is racist and linked to white privilege..so, we are ok with average–as long as your comfortable and not triggered.

            1. I wasn’t suggesting a link between high taxes and prosperity. I was just pointing out that the link between LOW taxes and prosperity that others have suggested is iffy. The tax rate in 1944 was 94% on income over $200,000. The maximum rate never dipped below 70% until 1981. That is almost twice the current rate.

              I don’t think that anybody who wants to “make America great again” would argue that things were economically worse for the average (white) family in the 1950s than today. In 1973, the median family income adjusted for inflation was about $50,000. In 2021, it still is. In 1973, the median income for the top 2% of American households was 4X greater, $200,000. Today, it is $450,000, 9X greater. The low tax rate has helped the rich, but hasn’t done much for the general population.

    1. c, or kent, or thelonious, or firsty whatever your name is today: as usual you start your comments not about the article but with a lie and an underhanded partisan swipe against demos. hate to break it to you, genius, but you don’t know what being rich means. a lot of rich brats in the world inherited their wealth, make a lot of noise about how they toss it around, and then on paper are found to be so deep in hock that my mailman has more actual assets he can honestly call his own. of course you don’t want to know the truth about cheeto, do ya?

      now you switch the topic to economy. your red team hasn’t bothered to present any economic plan since Gingrich’s Contract to Screw Middle Class America. the parrots who repeat simplistic conservative-sounding economic platitudes here on a facking computer forum are the same loud minority that voted for the Grand Obstructionist Party, which hasn’t taken action to pass any meaningful pro-growth economic investment or spending reforms in well over a generation.

      who’s the last president to balance the budget? the same one who supported massive internet expansion that helped Apple become what it is today. one of the key players sits on the Apple board to this day, and all you can do is throw stones at his legacy.

      or riddle us this: Ike created the interstate highway system and paid for it with progressive taxation. why don’t you follow anything that great president did? not only are you against the demos, you have literally turned your back on the formula that ushered in the most prosperous era fir the usa in the last century. gi bill education, domestic investment, highly progressive taxation to incentivize business leaders to reinvest profits into their people and companies rather than their own pockets.

      now you worship the lie that is trickledown. what has any repub president pushed for since ike? nothing but self-enriching pork or budget-wasting foreign military adventures. or both.

      you were so proud of erratic tweeting from a brazen liar. i would rather have an elderly leader who occasionally misspeaks but honestly pushes for domestic spending to upgrade US infrastructure and job training and parental assistance with childcare than listen to you and your faction insist over and over and over that the richest people in the history of the world are too cheap and self-absorbed today to leave a healthy infrastructure for the next generation. you obviously think america is only great inside your gated community. you aren’t conservative. you’re selfish and greedy with no redeeming principles. for two generations the gop has watched the middle class slide backwards and all you could do is turn your back and enrich yourselves. you don’t deserve the support of the lower 90% income households.

      1. Wow. How wrong can you be.

        First, you’re a bitter fscking idiot using an alias while accusing others of the same thing.

        Second, it was the Republican House that balanced the budget while Clinton only signed it.
        Had he gotten Hillarycare that would’ve been impossible.

        Third, see #1…(and now for a bloated and bloviated reply from you know who)

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