December 21, 2017 / 6:45 PM / 4 months ago

U.S. tax plan overhaul will produce only 'short-term minor boost': Dalio

NEW YORK (Reuters) - The U.S. tax overhaul will provide a “short-term minor boost” to the economy but doesn’t address investment and productivity, or economic, social and political issues, according to billionaire hedge fund manager Ray Dalio.

Ray Dalio, founder, co-chief investment officer and co-chairman of Bridgewater Associates, speaks at the 2017 Forbes Under 30 Summit in Boston, Massachusetts, U.S. October 2, 2017. REUTERS/Brian Snyder

The legislation, which Congress passed this week, will only widen a wealth disparity between the bottom 90 percent and the top 10 percent of the population, Dalio 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.”

Dalio characterized the political environment as hostile.

“There’s a war going on, and biases are entering into the choices being made, so there is not decision-making based on what is good for the whole so much as decision-making based on what one group that has more power wants, relative to what the group that has less power wants.”

Overall, Dalio said the tax overhaul was a missed opportunity to produce long-term economic and social benefits for the United States.

“So we’ll do the tax adjustment tweak and the regulatory tweak - a little bit here and a little bit there - but we won’t change things materially. In other words, the headline is that we’re still not dealing with the bigger issues.”

Reporting by Jennifer Ablan; Editing by Bernadette Baum

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