Billionaire investor and Bridgewater Associates founder Ray Dalio joins ‘Influencers’ for a discussion on what to expect with President Joe Biden at the White House.
ANDY SERWER: What do you think about … how you evaluate the Biden administration so far, the president and, in particular, Janet Yellen?
RAY DALIO: Well, I would say politically, it is a reality that there are two political parties in both cases that there are quite extreme elements in that. We can call it capitalist and socialist, or we can call it whatever we want to call it. But there is a range and there is not much in between. It’s hard to be in the middle because you have to align with any of those.
So in terms of, let’s say, economic policies, broadly speaking, there’s not much, you know, it’s hard to fight both Democrats and Republicans. And what does that mean? Things like the estate tax could be a litmus test. But in any case, I think there is a great movement to address those gaps that I am referring to.
Therefore, we should expect significant increases in taxes, etc., in various ways. We can get into our discussion on that if you want. And depending on whether it is done wisely or not, it will affect the markets. For example, when we cut corporate taxes, that benefited stock prices. Depending on how tax rates are changed, etc., that will certainly affect asset prices and capital flows.
ANDY SERWER: Let me ask you about the estate tax. Tell us what your proposal is, what would be your idea of a correct wealth tax.
RAY DALIO: I am a mechanic. I am not an ideologue. Basically, I’m someone who basically thinks that if you move the lever like this, what will happen? That is basically it. What I did was do a study of all the cases of wealth taxes in different countries that have existed. And look what happened to them. And I pass it on. I didn’t comment on that, but there are facts, which is like, I looked at 33 cases. And in none of those cases did they … were they sustained and raised a significant amount of money.
In some cases, like Switzerland, it has a wealth tax, and it is a very small tax, and it was maintained. Norway has a tax, it was small and steady. Those that are great have not lasted for a variety of reasons. They are operationally difficult and so on, you know, illiquid assets. I will not go into all that. But there are different kinds of ways to tax wealth. And then you will see … I think you will see the easier ways that fiscal wealth becomes more popular, like the stepped-up base.
In other words, today when you die, you get, if your assets appreciate, you don’t have to pay capital gains tax or inheritance tax. I think that’s probably in danger. And I think you will find other different types, property taxes, other things, can come up. But that’s my thinking on estate taxes in general. They also have a … the big risk is, is this an environment that is welcoming to capitalism and capitalists?
That affects capital flows a lot, and it doesn’t just affect US capital flows. Americans think they are just Americans. No, no, no, foreigners own many more bonds … American bonds than Americans. So the whole notion of where to go, where is a safe market for capitalism and capitalists has an effect on capital flows. So those are the mechanics.