Jeffrey Gundlach, chief investment officer of DoubleLine Capital, said the congressional tax plan would expand the federal deficit and help a small fraction of the U.S. population, including hedge fund managers.
"I'm very disappointed incidentally about the shape of this tax cut that is being proposed," Mr. Gundlach told a gathering of industry participants at the Drake Hotel in Chicago on Wednesday. "I am just appalled that we are going to continue to have a carried-interest scheme for hedge funds."
The bill the House passed Thursday keeps the carried-interest tax treatment that benefits private equity managers, venture capitalists, hedge fund managers and certain real estate investors. During last year's campaign, President Donald J. Trump had vowed to get rid of the loophole. White House top economic adviser Gary Cohn has said Mr. Trump is committed to ending the tax break.
"After I saw that tax bill, I lost hope with the drain the swamp concept," Mr. Gundlach said. "The swamp keeps getting bigger."
Carried interest is the portion of a fund's profit — usually a 20% share — that's paid to managers. Currently, tax authorities treat that income as capital gains, making it eligible for a rate as low as 20%. The top tax rate for ordinary income is 39.6%.
The tax reform proposal by the House does restrict the carried interest tax break somewhat by increasing the amount of time managers have to hold investments to receive the benefit, to at least three years from one year currently. The Senate plan as of now doesn't address carried interest but two senators have said they expect that to change as the legislation is negotiated in Congress.
Mr. Gundlach, one of the world's best-known bond managers, also offers hedge fund strategies at DoubleLine. His net worth is estimated at $1.4 billion by the Bloomberg Billionaires Index.
He called the tax plan "a cosmetic tax decrease for the middle class that will go away over time."
The tax proposals are being hotly debated in Washington this week as legislators press for a final bill before the end of the year.