Dalio Says Benefits From Tax Plan Will Be Small, Costly and Fade

(Bloomberg) -- The U.S. tax overhaul will provide a “short-term minor boost” to the economy that will ultimately fail to impact the nation’s economic, social and political issues, according to billionaire hedge fund manager Ray Dalio.

The legislation, which Congress passed this week, will do little to bolster investment and productivity in the long-term, he said in a LinkedIn post Thursday. While changes to the corporate tax structure -- including slashing the rate businesses pay to 21 percent from 35 percent -- will make the U.S. a more attractive place to do business, the nation would be better off investing more in infrastructure and education, he said.

“While the tax bill will stimulate growth in the short term, we won’t get much long-term mileage out of it in comparison to paths to direct stimulus spending to areas that hit the core issues holding back U.S. productivity,” said Dalio, founder of the world’s biggest hedge fund Bridgewater Associates. “We’re still not dealing with the bigger issues.”

Politicians are failing to make crucial decisions based on the good of the whole, and are instead exploiting power dynamics to favor one group over another, he said.

In a post earlier this month, Dalio criticized the proposed elimination of state and local income-tax deductibility -- which, in the final legislation, is capped at $10,000. He said it would take a toll on high-tax areas due to lower revenues as high-income earners move out of state, ultimately exacerbating the polarity and conflict between the wealthy and lower-income U.S. taxpayers.

Dalio has also said that policymakers should be looking at the U.S. as two separate economies -- the top 40 percent, and the bottom 60 percent -- rather than at the national average.

“Based on such metrics, we would see that no significant needed changes are being made,” he said in his post Thursday. “That’s tragic.”

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