How the Democrats proposed tax provisions could impact financials and real estate

The Democratic Party’s proposed tax provisions could have significant implications for the financial and real estate sectors, according to TD Cowen analysts.

The platform includes several measures that, while not new, could become more relevant due to the necessity of enacting tax legislation in 2025. Key proposals include raising the corporate tax rate, increasing the stock buyback tax, and eliminating like-kind exchanges in real estate.

Notably, the corporate tax rate could increase to 28% while tax rate on foreign earnings may double to 21%.

Furthermore, the proposal to increase the stock buyback tax from 1% to 4% is expected to raise $166 billion, with TD Cowen highlighting that this could directly affect banks since regulators favor buybacks over dividends for capital returns.

Another significant proposal is the elimination of like-kind exchanges in real estate, which allows investors to defer taxes on profits as long as those profits are reinvested in other real estate assets. This change “could hurt investor interest in commercial and residential properties,” TD Cowen analysts note and would raise around $20 billion.

Overall, analysts view the majority of tax provisions in the Democratic platform as relevant, considering the need for Congress in 2025 to implement a tax package “that addresses the future of the Trump individual tax cuts.”

“It means there is a path forward for these measures to advance next year,” they added.

The Democratic platform’s tax provisions hold significance because they reflect demands that the party is likely to pursue, regardless of which party wins the upcoming election, TD Cowen explains.

The investment bank points out that the need to offset the $4.5 billion cost of extending the Trump-era tax cuts "means that even ideas that normally would not get attention could be in play." Among these ideas is the proposal to treat capital gains as ordinary income, a change that could potentially raise $289 billion.

It also notes that banks, which typically face higher average tax rates than other sectors, would be more significantly impacted by the proposed increase in the corporate tax rate, a measure expected to generate $1.3 trillion in revenue.