Executives are facing uncertainty over how the November election could impact their investment and growth strategies, with the corporate tax rate being a key variable. Vice President Kamala Harris supports raising the current 21% rate to 28%, in line with the Biden administration’s proposal. On the other hand, Republican presidential nominee Donald Trump has suggested lowering it to 20% or even as low as 15%. However, these changes depend on whether either party gains full control of Congress.

With the election just a few months away, tax advisers are suggesting businesses prepare for a corporate tax rate of around 25%. A higher tax rate would be more significant now than a decade ago, given that the 2017 tax reform broadened the tax base. Finance executives are considering the potential effects on cash flow, investment decisions, and whether to raise consumer prices to offset higher tax bills.

John Gimigliano of KPMG explains that higher taxes reduce the after-tax return on investments, meaning businesses need to understand how tax changes will influence their options. For companies like Vera Bradley, which reported nearly $81 million in revenue for the three months ending May 4, higher taxes could slow growth plans. CFO Michael Schwindle noted that taxes already account for a significant portion of the company’s cash for investments, and a higher rate would reduce available capital, especially for expansion efforts.

Higher taxes could also affect consumer prices. Mama’s Creations CFO Anthony Gruber indicated that if their tax rate rises from 24.5%, they might consider raising prices on their deli food products. The company saw a 29% revenue increase, reaching nearly $30 million, for the three months ending in April. Gruber added that favorable tax rates could encourage companies to keep operations in the U.S., rather than looking abroad to limit tax exposure.

Some companies, like Chipotle Mexican Grill, are less concerned about tax changes affecting their growth strategies. CFO Jack Hartung noted that despite preferring a lower tax rate, Chipotle would not pull back on investments in new restaurants and ingredients if taxes rise. With strong financial performance, including a 33% increase in net income to $456 million for the three months ending June 30, Chipotle remains focused on its expansion plans, regardless of the election outcome.

Meanwhile, other companies are preparing for various tax scenarios. Conagra Brands CFO Dave Marberger said the company is modeling different tax rates in its long-term forecasts to understand the potential impact on cash flow and capital investments. As businesses anticipate changes, many are waiting for more clarity before making significant adjustments to their strategies.

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