• Some $38bn in tips is reported to the US government annually
• Kamala Harris currently has a 4% lead over Donald Trump in the polls
• If elected, Trump says he will bring in a 10-20% tariff on all imported goods

With the national debt to GDP ratio nearing 100%, both political parties in the US are somewhat prohibited in their fiscal generosity and have refrained from promoting any meaningful deficit-financed tax cuts or spending increases in the presidential race thus far. Nonetheless, Harris recently unveiled her economic proposal should she be elected come November and although we are waiting for Trump to formalise his policies into a detailed plan, he has given multiple speeches around what we can expect. This week we will look at several of their stances in more detail.

Probability of winning presidency

Source: Capital Economics

Tip tax

Trump was first to call for the removal of income tax on tips during a rally in Nevada – claiming the idea was brought on after a local waitress complained about the issue earlier that trip. Since then, Harris also gave support while visiting the state earlier this month.

Nevada has historically been a ‘swing state’ with a mixed voting history and oftentimes posts a finely balanced result. Without a record of political loyalty – the Silver State is particularly important to winning an election and with c.20% of the population employed within the services sector, this policy is of particular interest to its residents. Under the current regulation in the US, tip recipients have a $20 per month allowance, and anything more received must be disclosed to their employer. Over $38bn in tip income is reported annually according to the latest data, amounting to c.$6,000 in income per taxpayer.

Price gouging

Both candidates wish to decrease inflation, but through different means. Harris, in keeping with Biden’s rhetoric blames businesses and claims that they have engaged in price gouging – using the inflation rate as an excuse to increase prices while costs have remained stable, making record profits. She plans to endorse outlawing such practices, implementing what some view as price controls. Trump on the other hand plans to drive down inflation by ramping up US oil and gas production while empowering cabinet secretaries to remove employment barriers early on in his presidency.

Tariffs

Of course, Trump has been campaigning for some time around bringing in a 10% tariff for all foreign imports – but he recently said the tariff could be as high as 20% for some countries “that have been ripping off the US for years”. He has also recently said that a 50% tariff will be implemented on all Chinese goods.

Though Harris has not yet announced any further trade tariffs, Biden’s administration has kept and, in some cases, built on many of the foreign good’s tariffs that began during Trumps presidency, so it isn’t beyond the balance of probabilities that we could see these materialise.

Bowmore portfolios

The US remains the largest geographical allocation within our equity exposure, both through focused market capitalisation strategies and thematic investing.  However, due to its increasing popularity and lofty valuations, we recently took some profits within the region, preferring to allocate to different areas of the market which offer better value opportunities on a risk adjusted basis.

Our large-cap exposure includes Brown Advisory’s US Sustainable Growth fund, which focuses on US companies that demonstrate a strong earnings growth potential while adhering to sustainable business practices. The fund allocates to the technology, financial services and healthcare sector and has returned 10.2% year to date.