Expect ‘significant’ tax hikes: Ray Dalio

Billionaire investor and Bridgewater Associates founder Ray Dalio joins 'Influencers' for a discussion on what to expect with President Joe Biden in the White House.

Video transcript

ANDY SERWER: What do you make of-- how do you assess so far the Biden administration, the president, and in particular, Janet Yellen?

RAY DALIO: Well, I'd say politically, it's a reality that there are two political parties in both cases that there are rather extreme elements to that. We can call it capitalist and socialist, or we could call whatever we want to call it. But there's a range, and there is not much in the middle. It's difficult to be in the middle because there have to align with either of those.

So in terms of, let's say, economic policies, generally speaking, there's not much-- you know, it's tough to fight with both your Democrats and the Republicans. And what does that mean? Things like the wealth tax might be a litmus test. But in any case, I think that there is a big movement to deal with those gaps that I'm referring to.

So we should expect significant increases in taxes and so on in various ways. We can get into our discussion about that if you want. And depending on whether that's done smartly or not will affect the markets. For example, when we cut corporate taxes, that benefited stock prices. Depending on how the tax rates are changed and so on, that will certainly affect asset prices and capital flows.

ANDY SERWER: Let me ask you about the wealth tax. Tell us what your proposal-- what your idea of a correct wealth tax would be.

RAY DALIO: I'm a mechanic. I'm not an ideologue. I'm basically somebody who basically thinks if you move the lever this way, what will happen? That's 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 those. And I pass that along. 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 have-- were they sustained and raising a significant amount of money.

In some cases, like Switzerland has a wealth tax, and it's a very small tax, and it was sustained. Norway has a tax, and it was small and it's sustained. Those that are big haven't lasted because of a variety of reasons. They're operationally difficult and so on, you know, illiquid assets. I won't get into all of that. But there are different types of ways of taxing wealth. And so you'll see-- I think you'll see the easier ways the tax wealth become more popular, such as stepped up basis.

In other words, nowadays, when you die, you get, if your assets appreciated, you don't have to pay the capital gains tax on that and the inheritance tax. I think that's probably in jeopardy. And I think that you'll find different other types, property taxes, other things, they may come about. But that's my thought on the wealth taxes in general. They also have a-- the big risk is, is this an environment that's hospitable for capitalism and capitalists?

That affects capital flows a lot, and it's not just affecting American capital flows. Americans think it's just Americans. No, no, no, foreigners own way more bonds-- American bonds than Americans own. So, just the whole notion of where to go, where it's safe market for capitalism and capitalists has an effect on capital flows. So those are the mechanics.