Implications of the 2024 Election on the Agency M&A Market (Updated)

A few months ago I wrote a summary of the implications of the 2024 presidential election on tax rates and the M&A market.  At that time, Joe Biden was the candidate.  As we all know now, VP Kamala Harris has been nominated as the Democratic Party candidate.  Harris’s position on taxes is even more progressive than Biden’s and her intention is to increase tax revenue by $5 TRILLION over a decade.

How Will the 2024 Presidential Election Impact the Agency M&A Market?

Here are some key highlights of how Harris intends on increasing taxes:

1. Corporate Tax Rate

While Harris has not affirmed her full tax policy, she supports Biden’s proposed 28% tax rate on corporations and has floated a 35% tax rate, both of which are drastically higher than the current 21% corporate income tax rate.

2. Capital Gains and Financial Transactions

As with Biden, Harris is proposing to tax capital gains at ordinary income rates for high earners. She also supports a financial transactions tax on stock, bond, and derivative trades, which could affect financial markets.  More recently, Harris proposed taxing unrealized gains on assets held by very high net worth individuals, which, as most commentors have noted, is ludicrous.

3. Top Individual Income Tax Rate

Harris supports raising the top individual income tax rate to 39.6% for the highest earners, in line with Biden’s proposals.

4. Premium Tax for Medicare for All

Harris introduced a 4% premium tax on individuals earning over $100,000 to help fund Medicare for All, which deviates from Biden’s commitment to not raise taxes on families earning under $400k per year.

The Bottom Line

We can assume that VP Harris would pursue a tax policy at least as aggressive as that presented by President Biden and likely worse given some of her recent comments and past positions.  As I illustrated in my post about Biden’s tax proposal, these tax hikes will have a significant detrimental impact on the M&A market and to business sellers, in particular, if passed.

One looming question is whether or not, if elected, Harris would pursue enacting the tax hikes retroactively.  While there is not much precedent for a retroactive tax increase, it is on the table depending how the election cycle shakes out.

If you are thinking about selling your agency in the near future, give us a call for a confidential discussion.  NOW is the time to get ahead of tax planning.  If your plan was to sell in this calendar year, before the election, the window is closing rapidly.

References:

1) The Tax Foundation

2) RSM International

Posted by:

Michael Mensch, Founder and CEO

Direct:  (321) 255-1309