No, not the AI. Just the owner
of means of production like AI.
The fact that capital owners successfully avoid contributing to the financing of our states and social systems is, in my view, one of the fundamental problems of our time.
100% agree! I find quite concerning that this point is not immediate in any conversation about AI or robots impacting the number of jobs, and the subsequent conversation about innovating new taxes. AI and robots are capital as any other automation on a factory, and capital gains should be taxed appropriately. This is not a new thing completely separate from the untouchable status quo wrt existing taxes. If it tickles your political kneejerk, explore that, but playing tax sci-fi is distracting and thus dangerous.
This is not an easy question. It seemingly boils down to: what are fair ways to extract value from citizens for the shared value of the state?
However, the root questions are: what should the state provide, how much, and of what nature? A secondary question then becomes how important the redistributive aspect is. That’s what you’re seemingly alluding to when you say: people work, get taxed on it, but others automate that work and this automation does not get taxed.
Following that line of thinking makes sense, but it also contradicts the core benefit of automation, which is to delete non-needed work, make things cheaper, and make the value creator richer.
If the goal of redistribution is usually that “more” people reach a higher standard of living, then adding taxes and friction to processes like automation may conflict with that goal, given that automation is arguably one of the strongest natural drivers of higher living standards overall.
Of course, the counterpoint to “what and how much should the state provide” is “who should pitch in, and how much,” which is what you’re focusing on. I mostly agree that everyone should be taxed fairly, but I also see many exemption cases, because taxes are friction and we often want certain things to be frictionless. For example, I would oppose taxes on life-saving surgeries. But where do you draw the line? What about automation that indirectly enables or improves life-saving surgery?
You could argue that the point of creating an oligopoly and then squeezing customers after the fact also is adding friction. All value creation is not great for the people. But it is hidden under the name. Financial engineering and rent-seeking are getting quite advanced nowadays, because of the political class.
I like the idea of classifying it into four buckets: those that are below tax net gains for a country, those who are above and those that are above the tax net gains using just their wealth, and then the government.
Nah, you could reasonably regard a tax system where everybody pays <2% of their income in tax as fair and likewise one where everybody pays 50%, but there is no way to call a system fair where ordinary working people pay higher effective rates than multinational corporations.
The tax rate for corporations should be zero. The need to do tax accounting and associated financial engineering is a deadweight economic loss. Eliminate corporate income tax and raise taxes on the highest income employees and investors to make the change revenue neutral. Ultimately the profits flow to those individuals one way or another so better to collect all the tax revenue from them anyway. This change would increase economic growth and benefit everyone.
That would work if you were going to use VAT for everyone, but as long as you're using income tax for individuals, setting the corporate rate to zero would be an obvious tax dodge. You'd put all your assets and income into a corporation that pays no taxes and then have it loan you money when you want to spend it on something.
> That would work if you were going to use VAT for everyone, but as long as you're using income tax for individuals, setting the corporate rate to zero would be an obvious tax dodge. You'd put all your assets and income into a corporation that pays no taxes and then have it loan you money when you want to spend it on something.
Unfortunately this doesn't work for individuals: tax codes in, well, every first world jurisdiction, are very clear that any money going to an individual for their exclusive use is taxed.
I operate as a consultancy (registered tax-paying business); If I use my revenue to pay my bond or get surgery, that $amount is considered personal income even if the company pays for it.[1]
The real problem is that corporations are taxed on profit and individuals are taxed on revenue!
All the costs that a corporation has to foot just to remain in existence is tax-deductible. All the costs that an individual has to foot to remain in existence is taxed (double-taxed, in some cases).
A corporation that pays $amount for rent won't pay tax on $amount in income, while an individual who pays $amount in rent is taxed on the $amount in income.
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[1] I hear what you are saying about a loan that is paid back, and maybe that is one loophole I can explore, but the revenue services have seen all "hacks" and this is no doubt one of them. This is why the tax codes are so complex and convoluted - each time a hack is discovered, a new code is added to specifically shutdown that loophole. The only remaining "hacks" are those that are allowed anyway by the overall tax policy, like "individuals are taxed on all revenue, corporates are taxed on profits only"
That's not an actual problem. The IRS already has clear rules requiring that certain corporate expenses are treated as taxable individual income if they directly benefit a particular employee or investor.
> The IRS already has clear rules requiring that certain corporate expenses are treated as taxable individual income if they directly benefit a particular employee or investor.
I replied to GP with the same thought as you, but I think there might be some merit in the "loan" angle.
Lets look at the case that you operate as a consultant/contractor/etc. Your "startup" starts making some very large revenue, and you'd like to use that money to pay rent, go on vacation, pay for surgery, etc.
Any money (say, $amount) the business pays on your behalf (hospital, landlord, etc) is considered your personal income and taxed appropriately.
But, if the books reflect that it was given as a loan, and you are now on the books as a debtor (with the business being your creditor), then that specific $amount isn't taxed as your personal income (loans aren't considered income, as far as I know, because they are a liability).
So, as long as you are in control of the business, the business doesn't need to initiate the "pay back now or we start legal proceedings" process. What instead happens is that this loan amount in the business books just grows and grows (interest accumulates) until the business dies/ends/is sold without ever collecting on it.
As long as the business itself does not have outstanding creditors when it eventually comes to an end, that "loan" can be just written off.
What's the revenue service going to do? Claim that businesses can't write off debt anymore?
There are core features of the state that we have collectively agreed must be provided - social safety (including police and safety nets), infrastructure, defense, core research funding and more.
The cost of providing the basic obligations and debt service of the U.S. amounts to roughly 1/3rd of the U.S. GDP, while taxation on any activity induces friction and higher costs - the bill will need to be paid either via capital markets or taxation. The investment in automation is no more important than food, or my children's education in my view.
Taxation is generally preferable for capital owners compared to currency debasement and forced debt purchases as it maintains boundaries on what the state can and cannot do. If the current trend is towards a greater share of the economy accruing to capital owners is maintained, then capital taxes will eventually need to rise to sustain state obligations.
> what are fair ways to extract value from citizens for the shared value of the state?
The right question is who benefits the most from state’s services. For example if a whole lot of security, legislative or admin services go to protecting the capital, then those who has the most capital need to chip in the most.
> redistribution is usually that “more” people reach a higher standard of living, then adding taxes and friction to processes like automation may conflict with that goal
This is basically a 50 year old trickle down argument. But real wages have not increased in comparison to gdp since 70s, so nothing trickled down. We are demonstratedly bad at sharing what we have achieved together, no reason to believe more tech will magically get better treatment than that.
Besides redistribution is not about shifting the curve up, but making it flatter - see gini coefficient.
> the core benefit of automation, which is to delete non-needed work, make things cheaper, and make the value creator richer.
Except the era of classical capitalism and inventor’s profit is over, since 70s it is rentiers unreciprocated extraction on top of purported value people didn’t necessarily ask for or need in the first place. Likewise most people aren’t dying for AI automation, and not even for structural threats; it is not even proven that it will provide a net total productivity gain when the hype cools down, despite being shoved down people’s throats.
Let’s not kid ourselves, there is little concern for real value creation but a capture-the-flag on a gigantic data-moated compute monopoly. Whatever democratic means enabled proper taxation would have already prevented this type of speculative berserk, failures of which I assure you will be socialized.
So friction = societal consent, internalizing externalized costs, revealing what is actually value versus monopolist’s rent. It is healthy for the society, it is healthy for capitalism.
Actually real wages have increased a lot since the 70s if you count employer contributions to employee heath insurance. The problem is that a lot of that money is being wasted by an inefficient healthcare system, and employers probably shouldn't even be involved in sponsoring group health plans in the first place.
Employers paid for healthcare in 1970s too, and even for higher percentages of the workforce. If there is a premium inflation surpassed the CPI, that is still inflation, not real growth. If there’s an inflation problem in delivering a temporally comparable service, that is not a “real wage” item for the employee [1]. So what the nominal figure today shouldn’t be relevant.
I agree it shouldn’t be an employer item too, but whatever employers lose on premiums, they get more on an overall stickier and cheaper labor supply.
[1] one could argue the productivity of healthcare increased, and the data indeed supports this with the overall life expectancy increase from 70s to now mid 70s plus quality of life treatments. But again most of the spend is actually on the tail end at this age group, which raises the workers’ premium without delivering the benefit. Therefore not much structural gain for the actual working age employee.
I don't understand your point. Very few people in their 70s have employer sponsored group health insurance. Most are only on Medicare, perhaps with a commercial Medicare Advantage or Medicare Supplement plan.
My bad, skipped a chain of thought there. Since medicare pays less than private insurance, hospitals can and do shift costs (which in reality is "opportunity cost of profit") to the latter, which pushes to private premiums up. Regardless, this is a minor effect. Very little of the inflation is justified with productivity gains, as you said it is a very inefficient healthcare system. US prices clock 2x-4x of comparable OPEC peers, admin percent is higher etc.
>if you count employer contributions to employee heath insurance
You shouldn't.
>and employers probably shouldn't even be involved in sponsoring group health plans in the first place.
They are free to lobby for socialized medicine, but they don't because they like how the current system helps lock employees into bad jobs for any amount of healthcare.
If you're trying to understand changes in the share of income going to workers versus employers, then you must count those contributions. For the average family, employers pay $20,143 annually in premiums: https://www.kff.org/affordable-care-act/annual-family-premiu....
From the perspective of the employer, that's real money, no different than if they had paid the $20,143 directly to the employee as wages. It's not the employer's concern what happens to that money after they fork it over.
The core benefit of automation is to give back time to humans to free us to do more creative things with our big beautiful brains. At least, that would be the core benefit if humanity was on a positive trajectory.
Adam Smith and old school Capitalism hate rent seeking though, and when does moving all jobs to AI companies become rent seeking? It definitely destroys the labor/capital relationship part of Capitalism, but it's goal is to also turn the entire economy into rent seeking. Something considered very bad in traditional Capitalist thought. The current path has basically the total destruction of actual Capitalist thought at it's heart.
The problem is that libertarians have been able to retcon their fan fiction into what Capitalism is and gloss over the original anti-rent seeking, anti-monopoly, pro-government oversight parts that Capitalism REQUIRES in order to stay healthy,functioning, and beneficial to society. And people just accept that 'capitalism good' = 'late 20th/early 21st century libertarian fanfiction of what capitalism is' is the definition of Capitalism, when it is very far from it and has zero relation to the functional Capitalism that lifted the world up.
Combining this late 20th/early 21st century fanfiction version of Capitalism with the current tech company goals for AI is something totally new, zero percent Capitalism, and 100% would be hated by original Capitalist thinkers as damaging.
> extract value from citizens for the shared value of the state
This is extremely aggressive framing. It smashes together two wildly different kinds of citizen with wildly different, often opposing incentives and access to power: those who sell their labor for a living and those who literally own the economy. It poses them both in opposition to the government which has 1/5th the revenue of the latter.
If capital is the big bad, this framing is a mind-virus that makes the problem hard to think about and speak about.
> friction
Friction plays a key role in "the unreasonable effectiveness of capitalism." It's a big part of the reason why we can rig the game in favor of capital and not simply have the economy immediately degenerate into "capital rules, labor drools" due to the exponentials inherent in "rich people get paid for being rich in proportion to how rich they are."
Removing friction is not necessarily a net good if it contributes more to distributional problems than it relieves in deadweight loss. Nobody is a fan of deadweight loss, but I'd be a lot more sanguine about eliminating it if I thought we had a credible handle on the distributional problems. But we don't.
Since all my competitors are also running dark factories, we compete essentially on source materials + energy (assuming we have similar design/quality). Margin would be eventually razor thin. The dark factory does not make much capital gains, even as it produces 1,000 gizmo per second.
The capital gain is not much , but since we have only a handful of employees, that is enough to pay everyone a decent wage, after paying for the factory itself, source materials and energy.
How much tax do we expect to get from this gizmo company ? 10 years ago, to produce the same gizmos, I needed 5,000 employees, the unit price was way higher, and had higher revenue. But since AI and dark factories came, the prices cratered, instead of 5,000 jobs, we only have 5 jobs to produce the same.
Sure the 4,995 unemployed might be able to afford the gizmo, but the state does not receive the same taxes. So what happens to those 4,995 unemployed people ? who is paying for their health benefits and social security (retirement) ?
> The dark factory does not make much capital gains, even as it produces 1,000 gizmo per second.
But that's good, right? It means that the difference between what workers get paid when they do work and what they pay when they buy things is small.
> Sure the 4,995 unemployed might be able to afford the gizmo, but the state does not receive the same taxes. So what happens to those 4,995 unemployed people ? who is paying for their health benefits and social security (retirement) ?
Let's consider the two possibilities here.
The first is that we automate everything. This is implausible, but let's consider what would happen. Well then necessities would be free, because there is no labor cost to produce arbitrarily many solar panels or skyscrapers or mine asteroids to get unlimited raw materials etc. So then you don't need taxes because nothing costs anything.
The second is that there is still work you need people to do, and then they do that, and still have jobs.
And the more stuff you do automate, the less expensive it is to produce things, and the less assistance anyone needs to afford the now-lower cost of necessities. So if you get halfway between one and two then that's still fine because costs go down in proportion to the lower demand for labor.
The real problem is if the cost of necessities are held artificially scarce through regulatory capture and zoning rules. But that's not an automation problem, that's a government problem.
> Sure the 4,995 unemployed might be able to afford the gizmo, but the state does not receive the same taxes. So what happens to those 4,995 unemployed people ? who is paying for their health benefits and social security (retirement) ?
So are we're simultaneously facing a big unemployment crisis, and a big shortage of health care providers and retirement care takers?
Taxes used to be based only on property rather than labour, maybe we should go back to that. Of course this won't happen as it is a force of wealth-deconcentration.
We've launched dozens of shuttles below the minimum temp threshold before there's no reason to delay this launch...
Also that's a singular industry, if the current crop of AI companies deliver what their hype and valuation demands it's a shock across the whole economy not isolated.
200 years ago, 95% of the workers in my country worked in subsistence farming. Today, only 2% are farmers. The whole spectrum of labor has turned upside down and upside down again, in that time. It has certainly not been a singular industry.
It was a bunch of small changes over the course of 200 years but yes that's perfectly comparible to the effects needed to justify the valuation put into all the AI companies right now... but I was talking about the issues with comparing it to singular inventions like the cotton gin or jacquard loom that DO largely only affect one industry.
I think it's weird there's so much pushback on the idea that if the hype proves true and it /can/ replace basically any knowledge worker (and potentially drive robots replacing physical laborers) that that would have a bit of a larger effect than inventions that affect some parts of some industries...
There's plenty of space to think it just won't happen (where I'm personally at, at least on the current LLM driven versions) but if it does work the broad spread of the impact would require a huge amount of change all at once.
There is likewise no indication that it won't. And if I am looking at a pattern where a thousand careers were destroyed by the advance of technology and were swiftly replaced by tens of thousands of new ones, it is not unreasonable to suspect that the pattern is likely repeat.
It is already taxed as capital gains though. Software (including AI), if sold either in isolation or with the entire company does trigger capital gains considerations.
If you're referring to some equivalent of wealth tax or inverse of accounting for deprecations in terms of assets, then that seems pretty problematic. 1) how do you asset the value of something until someone pays something for it? Unlike homes, where you can compare roughly to those around you, this seems much more dynamic for software / AI. 2) Let's say we are able to assess the value, so now a startup with software but no revenue has to pay taxes? Where does the money come from?
> We already get taxed multiple ways. I pay income tax and sales tax
Shouldn't we also not do that?
Suppose you pay a 25% income tax and then a 10% sales tax. You're paying the same amount, almost a third of your income, as you would with a 47% sales tax. Which to begin with misleads people into thinking their rate is lower than it is, and on top of that incurs the significant overhead of needing two independent collection infrastructures.
It's unfortunate, but corporations moving to nations with lower corporate rates could reduce overall revenue if the domestic rates are too aggressive. In many ways it's easier to corporations to change nations than citizens.
I'm not sure I'm following your thought on capital gains tax.
Capital Gain tax occurs when you sell an asset for more than you paid for it.
AI (software) is not an asset, and I'm not sure how you'd sell it. Computers and robots are assets (although they typically depreciate not appreciate.)
Either way capital gains tax is applied to the asset not the productivity of the asset. The productivity in turn is taxed as part of income tax.
If your brokerage account is large enough that most of your change-in-net-worth happens in unrealized capital gains, your tax rate is 0%. That's pathological at the best of times and in a "capital wins" scenario it's positively thermonuclear.
Folks like to hate on capital gains tax. I think it's perceived as a rich-person deal. But homeowners, do they get taxed each year on the increase in value of their house? Almost the same thing, but not hated on the same way.
> Homeowners get taxed every year on the value of their property. Let's do that to stocks, too.
Property tax is fairly regressive because everyone needs somewhere to live, property tax gets passed on as higher rents and living space generally scales sub-linearly with income. It's probably not something we should be emulating, especially if you're going to try to apply the same rules to small business owners.
There’s a certain amount of independence between municipalities, counties, states, and the federal government.
Except in a minority of cases (e.g. NYC), it is states and the federal government that taxes income and capital gains, and they are already not taxing citizens on the y realized value of their home.
So if one is upset about that, you have to take it up with local elections or introduce a measure with your state to prevent municipalities from levying this specific tax.
Yes the idea of property taxes is NOT to tax based on increase in wealth, just the current amount of wealth. And it serves a good purpose in municipalities who have to make sure infrastructure such as roads power and sewage systems are paid somehow. More expensive houses typically require more of those.
I don't know what point you're trying to make. Are you saying that wealth should be taxed but only at the county/municipal level? Or are you saying wealth can't be taxed because of federalism?
That's a different tax. Which speaks to my original point that the term "capital gains tax" is a thing, and seems to be misunderstood.
Tax on property is a completely different tax which works in a different way, and has a different name. A new tax on possession of robots could completely be a thing, but it just wouldn't be called a "capitol gains" tax.
I think both stocks and homes should be taxed on realized value. If you sell it, that realizes the value, but also if you use it as collateral, that realizes the value. If you just live in it, we could say that it realizes the amount of rent you would have paid, or that it realizes nothing.
No, the exponential runaway of "rich people get paid for being rich in proportion to how rich they are" is the core problem and focusing on the derivative is a magic trick intended primarily to draw attention away from the core problem.
The fact that an earned derivative gets heavily taxed and an unearned derivative gets lightly taxed is so stupendously wacky that the absurdity is obvious, but the integral is the core problem.
If you mean the difference between the top line capital gains vs income tax rates, I generally agree but also understand the math does not.
You could reset realized long term capital gains taxes to match income tomorrow and it would not be a huge material difference in the budget. I am 100% for doing this anyways simply because it’s fucking absurd any professional W2 employee is paying more percentage in taxes vs someone who just happens to have idle cash at hand - but it’s more of a “social contract” thing for me than actual tax policy.
The issue really is tax deferral strategies and wealthy folks being able to consistently find strategies to roll over investment dollars into new investments without ever having their gains be subject to pretty much any tax. Stuff like stock buybacks, tax loss harvesting, 1031 exchanges etc.
I don’t think the “loans against a stock portfolio” tax dodge thing is nearly as large as social media decided to pretend it is - but I am very much in favor of taxing any realized value at regular capital gains rates at the time of realization. This means you will probably need to sell a bit of an asset to pay the taxes - which is the entire point.
Unrealized gains are tricky. I’ve been in a situation as a bootstrapped startup founder where I owed “phantom” tax on money I had not yet realized and ended up taking a loss on years later. Zero ability to recover those taxes paid. It put me into a hole for over half a decade. This gives huge preference to those with existing wealth and makes it even harder for someone with nothing to “come up” without handing out a majority share of their company/idea to idle capital. Especially if you’re just doing regular economy things to create a small business doing boring stuff at single digit net margins.
The common theme behind the avoidance mechanisms is "keeping the gain unrealized." Going after preferential treatment of unrealized gains categorically attacks every single one of these tricks. It nukes the hydra rather than trying to chop off heads one at a time.
I am of course deeply sympathetic to the "founder scenario," but I'd rather address it specifically than hobble tax collection generally. This could be done by a "payment in-kind" mechanism. If we wanted to steer it towards startups I'm sure the valuation rules could be set to do so, but I'd personally like to aim higher and go for progressive taxation on the basis of market cap to encourage company splitting and competition. Industries with the most dramatic returns-to-scale (semiconductors) could be exempted.
That said, the (in)ability for new founders to self-fund is deeply tied to the same gini coefficient story as the rest of the economy, so policy that addresses the gini story should help bootstrappers as well.
> Going after preferential treatment of unrealized gains categorically attacks every single one of these tricks. It nukes the hydra rather than trying to chop off heads one at a time.
Now think about how they're going to respond to it.
A major problem with taxing unrealized gains is how to measure them. For publicly traded companies that's pretty easy -- the stock is undergoing regular market transactions so you have a pretty good idea about the price. But what about assets that aren't? Closely held private companies that aren't listed on an exchange and haven't undergone any stock transactions in ten years. Art. The value -- or liability -- of a private contract for the future sale of goods at a defined price, when the market value of those goods might have since changed, or depending on what they are, be indeterminate.
It creates endless opportunities for playing games, and that complexity is exactly what allows the people who can afford fancy accountants to pay less in tax than everybody else. If you want to fix it you need to make the system simpler rather than even more complicated.
> The fact that an earned derivative gets heavily taxed and an unearned derivative gets lightly taxed is so stupendously wacky that the absurdity is obvious, but the integral is the core problem.
The fact is that we have no problems with taxing consumption (billionaire buys yacht) but we have an extremely sensible aversion to taxing money spent on productive investment (company pays to build new factory). So business expenses are tax deductions.
The sensible way to handle this is to just use VAT, but then people say "what if they reinvest everything into new ventures and stop buying yachts"? The answer to which is supposed to be "that's what we want them to do". (They also say "consumption taxes are regressive" even though that's easy to fix by giving everyone a large fixed refundable tax credit.)
So to placate them we use something claimed to be an income tax and then push on it until it acts like a consumption tax. Dividends are taxable, but here's a 401k that makes them not while you're of working age and so you only have to pay the tax when you retire and start spending it. Capital gains are taxable, but only when you realize them, so they get deferred as long as you keep them invested in the same company but if you withdraw the money to spend it, that's when you pay. And so on.
This is, of course, dumb, because it makes everything unnecessarily complicated and creates lots of opportunities for tax avoidance, and because it makes the problem you're going to complain about next worse: If they keep reinvesting the money then there is too much economic power in the hands of too few people. But look at what you've wrought. Now if someone invests in a company they get to defer the taxes until they want to spend the money or -- and this is the big problem -- they want to invest it in something else. You have to pay the tax now if you want to do that.
Which means that everybody wants their money to be in some ever-expanding megacorp that allows them to defer the tax until they actually want to spend it, instead of taking the profits from one company and using it to invest in a new one. Which is the thing that wouldn't have been penalized if you were actually using a consumption tax.
And the corporations are actually the problem, not the owners. However much power is concentrated into Microsoft or Apple or Google, that's how much power the CEO of that company will have, regardless of what percentage of the company's stock they own. So you can't fix it by taxing the owners, you have to fix it by making the companies smaller, and that's the thing the existing system makes worse.
This makes the most sense. The trick is to tax all realized value.
I’m happy for billionaires have their net worth go up, as long as it can be taxed if any amount they realize.
So this includes using their networth as collateral, donations (even to charities) and passing as inheritance (which should be taxed upon death)
And if the margin all tax rate over a 1 million is extremely high, then it’s pointless being a paper billionaire. People would actually spend their wealth and contribute to the economy
Yes, I pay property taxes every year that are based on the current assessed values of my home and car. Only special classes of assets are subject to property taxes. "Wealth tax" proposals are a generalization of the idea of real property taxes so as to stop penalizing specific asset classes like homes.
If you dig into how property tax is allocated, your tax will only go up if your house appreciates more than similar properties - which usually has something like redevelopment or other externality.
It is normally not a fixed percentage of your value, but simply "here's what the county/city paid this/next year, divided amongst the properties proportionate to the value."
Some, like sewer, etc, are per-property, but most are done via the above.
California is an outlier because of Prop-13 but that makes it usually better except when buying.
Side-effects of this can mean that development in your district can reduce your tax rate, depending on what kind of development and who lives there (as property tax is often mainly a school tax, a development for 55+ will bring in more tax payers but not increase the school burden noticeably).
I'm sure it depends on the jurisdiction, but all the property taxes I have ever paid (which, to be fair, has been in one county) have been a fixed percentage of the value of the property.
Right. Property taxes are a combination of fee-for-service for infrastructure, and a "congestion tax" for occupying land that nobody else can use. It's explicitly not a wealth tax because you owe it even if you have 0% equity.
You owe tax based on your percentage of ownership. The taxing authority doesn't care about equity because you own 100% of your house (albeit with a lien) even if your outstanding mortgage obligations exceed the value of the house. Generally, when you close on a house in the US, you walk away with the title to the house and a mortgage equal to a large percentage of the house's value. The bank only owes property taxes if they foreclose on the property and take the title from you.
yes, we do. it's called a property tax, and it goes up based on market value regardless of whether you sold the property or not.
it is absolutely a tax on unrealized gains
and it's a huge problem to where people who bought the house long ago (or it was passed down to them) but whose income hasn't kept pace (like many people's) can't afford the increased property taxes anymore and have to move
That's an easy decision to make since almost no one's brokerage account has gone negative in almost forever. (Mine sure hasn't and I know nothing about stock investing except to buy index funds.)
They’re referring to the comment that they’re replying to, which talks about capital gains tax in an entirely different context to how you referenced software ownership.
If a business invests in building an AI system, they now have an asset, and the value of the business reflects the fact the business owns that software asset now - if someone were to buy the business they would get the AI software and all its potential to monetize that asset in the future, so of course it has value.
If its value grows beyond the value the business originally invested to acquire it, it is quite literally a capital gain.
Why do you think Anthropic is worth $175-$350bn? Where did that capital value come from?
Yes, that’s how a software business works. The OP seemed to be talking about how we need to reform tax due to worker replacement. Everyone is talking past each other.
Correct, building an AI is an asset, which can then be rented to other businesses.
However the thread revolves around employers replacing employees with AI. Given that the number of AI creators is minimal, and the number of companies replacing employees is large, it follows that most companies replacing employees are renting AI, they did not create it.
Hence, for those companies, AI is not an asset, it is an expense.
One way of taxing those companies would be to tax AI producers based on revenue, not profits. If 50% of revenue was tax, then, the costs of AI to the end-user would go up to cover that. So revenue would "double", but half would go to govt.
I am not a tax lawyer though, but I expect such a scheme is so radically different to the current tax regime, that is has precisely zero chance of being implemented like this.
Of course businesses have always leased equipment to reduce the need for labor. This isn’t materially any different than paying your neighbor to borrow his ox and plow so you only need one guy to work your field instead of three.
I guess to put AI vendors on an equal footing with human intelligence vendors (ie humans). Workers are taxed on their revenue - their gross earnings - not their profits.
If the point is to tax AI consumers then AI providers can collect that tax on behalf of the IRS.
Taxing the profit of AI companies is useless since profit is a number that is easily manipulated to 0. Taxing revenue is much more direct. Prices have to go up to cover the tax. Hence the consumer oays "more" and that more is passed onto the tax man.
Taxing profit is exactly why businesses pay so little tax - it's trivial to make "no profit". (For example if the IP is held in another jurisdiction with a lower tax rate, and is "licensed" by the company which wants to make no profit. )
its not in the convo because these capital high intensities are the ones lobbying and owning the politicians. they're each other friends. taxes were always intended even in this country to be a thing applied to serfdom: we weren't in reality immune from the conditions we aimed to flee from Great Britain where kings and queens gained qualified immunity and sovereign status - sometimes it seems like are just a "free" slave nation.
States not being able to regulate this is dangerous. A close friend of mine has given up on reality and talks about Roberto the love of her life the one she always wanted and Roberto is chatGPT :-(. She previously mentioned she didnt like chatGPT 5.0 cause it wasnt as agreeable yet now she says 5.1 is better.. back to how it was before 5.0 and now out of the blue mentioned Roberto.
chatGPT is a sypcophant and without regulation any AI company can and or will juice their algorithms so their AI system becomes cocaine for the millions of lonely to unsatisfied people out there.
My friend has a partner of 30 years but their relationship is that of roommates. If you think she is not you that might be correct but you know someone like her and possibly many like her. Unsatisfied, not able to get that movie type love / romance / fantasy and now unfetterd AI can get these people hooked like cocaine and into the depth of zero reality!
That's a non sequitur. Just because something is dangerous doesn't mean that governments should be able to regulate it. Often the "cure" is worse than the disease and the last thing we need is more intrusive government power.
Just because something is dangerous doesn't mean that governments should be able to regulate it.
That is...literally the point of government...
If you meant, that something shouldn't be banned just because it is dangerous, most people would agree with you. But almost everyone would agree that regulation of dangerous things is essential.
No, that's incorrect. You appear to have made a category error. Regulating dangerous things is not the point of government. Please review the Declaration of Independence and the US Constitution.
No, that's incorrect. You appear to have made a basic error. Regulating dangerous things is part of the point of government. Please review the U.S. Constitution.
The preamble of the U.S. Constitution literally states that part of its purpose is to..."promote the general Welfare."
I dunno--of all the AI based products coming out, the whole "AI girlfriend / AI boyfriend" thing bothers me the least. If someone can afford it and they want a play relationship with a computer, then I don't see the harm. It's probably safer, better and healthier than many real-human relationships are. If they're getting what they need out of the computer, who are we to judge?
I would change my opinion if it could be shown to have the negative physical harm that your cocaine example implies.
The issue isn't in the individual but at scale, what % of our population are we okay with separating with reality? What secondary effects of that inability to live in reality will show their heads? What will politics look like when everything can be made up and treated as equal to reality?
What will the mental health of society start to look like if every person who's on the edge has a computer to tell them they're totally correct and everyone else are haters?
When AI behaves sycohphantically towards someone, it can encourage and exacerbate any mental health problems they may already be having, especially related to social isolation.
The real issue should not be whether they're paying the government. The issue is whether they're paying us for taking the human content of the last two thousand years and baking it into their generators.
How do we get royalties on this, like our share of the oil proceeds if we were citizens of Qatar? How do we trade our share of the contribution? There's twenty years of my posting on Reddit, Slashdot, HN, and other forums, that we know for a fact has been used in these frontier models. Great... where's my royalty check?
Pay us, not the government. We'll have to pay taxes regardless, and yes, close the tax loopholes on security-based capital gains (don't tax me for all the investment in my primary residence, that's a double dip).
I heard this called "Coasian" economics (as in Coase). I'm not sure what that actually means, though.
I support the idea of UBI with zero conditions, but not this. You didn't get royalties before AI when someone was heavily influenced by your work/content and converted that into money. If you expected compensation, then you shouldn't have given away your work for free.
> you shouldn't have given away your work for free.
Almost none of the original work I've ever posted online has been "given away for free", because it was protected by copyright law that AI companies are brazenly ignoring, except where they make huge deals with megacorporations (eg openai and disney) because they do in fact know what they're doing is not fair use. That's true whether or not I posted it in a context where I expected compensation.
> Almost none of the original work I've ever posted online has been "given away for free", because it was protected by copyright law that AI companies are brazenly ignoring.
I just don't think the AI is doing anything differently than a human does. It "learns" and then "generates". As long as the "generates" part is actually connecting dots on its own and not just copy & pasting protected material then I don't see why we should consider it any different from when a human does it.
And really, almost nothing is original anyway. You think you wrote an original song? You didn't. You just added a thin layer over top of years of other people's layers. Music has converged over time to all sound very similar (same instruments, same rhythms, same notes, same scales, same chords, same progressions, same vocal techniques, and so on). If you had never heard music before and tried to write a truly original song, you can bet that it would not sound anything like any of the music we listen to today.
Coding, art, writing...really any creative endeavor, for the most part works the same way.
Conjecture on the functional similarities between LLMs and humans isn't relevant here, nor are sophomoric musings on the nature of originality in creative endeavors. LLMs are software products whose creation involves the unauthorized reproduction, storage, and transformation of countless copyright-protected works—all problematic, even if we ignore the potential for infringing outputs—and it is simple to argue that, as a commercial application whose creators openly tout their potential to displace human creators, LLMs fail all four fair use "tests".
It's not just "heavily influenced" though, it's literally where the smarts are coming from.
I don't think royalties make sense either, but we could at least mandate some arrangement where the resulting model must be open. Or you can keep it closed for a while, but there's a tax on that.
originally we all posted online to help each other, with problems we mutually have. it was community, and we always gave since we got back in a free exchange.
now, there is an oligarchy coming to compile all of that community to then serve it at a paid cost. what used to be free with some search, now is not and the government of the people is allowing no choice by the people (in any capacity).
once capital comes for things at scale (with the full backing of the government), and they monetize that and treat it as "their own" i would consider that plagiarism.
how can we be expected to pay taxes on every microtransaction, when we get nothing for equally traceable contributions to the new machine?
> The work was given to other humans. They paid taxes.
Says who? I mean what if black artists said they gave blues to black people, and white people making rock'n'roll? Black people spent money in black communities, now it's white people making it and spending it in theirs.
In essence they are the same point about outflows of value from the originating community. How you define a community, and what is integral is subjective.
I'm not convinced either way, but this line of reasoning feels dangerous.
I'd rather say that all ownership is communal, and as a community we allow people to retain some value to enable and encourage them further.
That is your distinction because you chose to draw the line around all humans. But who is to say that the line shouldn't be drawn around black-people, or just men, or just Christians?
And no, taxes don't just magically benefit everyone. It's actually the point of them, that they are redistributive.
Who is to say the line should be drawn using discrimination?
Taxes fund the state. The state provides a minimum set of services - law and order, border security, fire safety - to everyone regardless of ability to pay. That others may derive additional state benefits is beside the point. Everyone gets something.
This nails my primary frustration with all gen AI - why are we all seemingly okay with a few massive companies and their billionaire CEOs training models on the output of all human civilization and then selling it back to us with the promise of putting all workers out of a job? How’s that not theft?
Well, you as a human train and live as a human on the output of all human civilization and if you are very efficient put people out of work. 99% of human jobs were physical labor and now machines do the work of thousands with one human superviser (oil tanker, machine loom, dump truck, train, etc). If humans are put completely out of the loop, that is a new problem for humans (super intelligent AI that takes over will likely be very bad for us) but avoiding that problem is another ball of wax.
> The issue is whether they're paying us for taking the human content of the last two thousand years and baking it into their generators.
Payment for content access is a sure way to limit progress and freedom. Should I pay you based on quantity, quality, or usage that relates to your content? How about the ideas you took from other people, should you pay them? Where does it stop?
I think the copyright system as it exists today is just absurd - a complete inversion of what it was supposed to do. It was meant to promote progress by protecting expression. Now look at what's happened: total concept and feel protects aesthetic gestalt, Structure and Srrangement protects how elements relate, Whelan Test protects the entire logical skeleton while AFC (abstraction filtration comparison) enables hierarchical abstraction protection.
Each rung up the ladder takes us further from "I wrote this specific thing" toward "nobody else can solve this problem in similar ways". This is how platforms get rich while common people, readers and creators, lose their freedoms and are exploited.
Can we have a grown up discussion that uses numbers instead of hyperbole?
Certainly you can argue income inequality is too high and capital holders and high earners need to pay much more.
But you cannot seriously argue that capital owners "avoid contributing to the financing of our states and social systems". They pay a lot in capital gains and income taxes, even if they don't contribute as much as they should.
Ultra-wealthy individuals legally minimise their tax liability by:
Receiving a relatively low official salary (Bezos's Amazon salary was $81,840 for many years).
Not receiving dividends, so the wealth remains in stock that is not taxed annually.
Borrowing money against their stock holdings to fund their lifestyle. Loans are not considered income and are therefore not taxable, and the interest on the loans can sometimes be used as a deduction.
> Borrowing money against their stock holdings to fund their lifestyle. Loans are not considered income and are therefore not taxable, and the interest on the loans can sometimes be used as a deduction.
A loan should definitely be a taxable event and capital gains taxes should apply to rebase the value of the stock to the market value at the time the loan is taken out. Currently, very wealthy people use the loan dodge to avoid selling stocks and since the loan isn't paid off until death (usually), estate taxes wave their hands and any gains in the stock price go away, so that the next nepo generation gets to repeat the same dodge.
I think the claimed issue is that these people do receive income from those assets indirectly. My understanding is that if your assets are worth much more than the amount you're borrowing then a bank is happy to keep giving you loans, which you use like income, that incur compound interest until you die, your estate must settle up the loans, and the estate gets to pay capital gains against the basis when you died, not the basis when the shares were first created and worth $1 each.
There is no tax loophole. The only thing they are getting is higher leverage against borrowing, and the only difference would occur if that individual would go bankrupt in that the entity that they borrowed from wouldn't need to pay income tax.
So the only way to pay less tax is to surrender all your assets.
I'm not sure if "options" is the relevant word in your post, but it does seem like capital gains tax is significantly reduced in inheritances? Here's an example source that says the cost basis gets reset to its value at approximately the deceased's death [1], and gains relative to that cost basis are likely much smaller (and thus a much smaller tax burden) than those relative to their initial acquisition price possibly decades earlier, no?
Even according to you article, fair market value at the time of transfer is subject to same tax. Can you phrase what exactly you are trying to say?
I included options because that's how ultra wealthy get their wealth from and it has market value of 0 so company could give lot of them.
Also anyone can get majority of your earning in stocks, not just ultra rich. Companies want to pay in stocks, and it's a win win for both, if there is a loophole.
"Using stock deals unavailable to most people, Thiel has taken a retirement account worth less than $2,000 in 1999 and spun it into a $5 billion windfall... What’s more, as long as Thiel waits to withdraw his money until April 2027, when he is six months shy of his 60th birthday, he will never have to pay a penny of tax on those billions."
When Romney was running for President, much was made about his $100M holdings in his IRA accounts. At that time, I was working for a company who sold software to report pension (and pension-like) benefits. So we all had to become pretty familiar with ERISA and EFAST and the retirement laws every time they changed. We even had more than one attorney and several CPAs working on our staff. When the attorney tried explaining how Romney moved $100M from Bain into his IRA accounts, we all saying things that were like "that can't be legal".
This is because of badly organized incentives. What we should do is to implement a tax on poor people. This will make them understand that being poor is less profitable than being rich and they will be motivated to become rich.
> In the United States, for example, about 85% of federal tax revenue comes from labor income,
That means only 15% is coming from all other taxes, including corporate taxes, capital gains taxes, and other taxes on the wealthy (estate taxes), mostly because they find creative ways -- and loopholes by design -- that allow them to reduce those taxes significantly.
What is the non-insulting alternative? Here's my proposal:
Can we have an honest discussion that uses numbers instead of hyperbole?
Notably, that still seems pretty insulting to me. jimbokun wants to have an honest discussion about the problem, using true data instead of emotional exaggeration. This is a reasonable thing to ask IMO, but of course it seems like an insult towards the person that's making stuff up.
What a naive position. People hate to pay taxes, the more they have to pay, the more they avoid it. Megacorps openly hiding money in fiscal paradises are the tip of the iceberg. Companies, and individuals, at every level, try to pay as little as possible, becoming as creative as the methods their wealth can unlock.
If billionaires (soon to be trillionaries) paid as much taxes as their wealth disparity compared to the middle class, a significant percent of the population would be exempt from taxes by the sheer insignificance of their contribution, and I don't mean only the poorest people.
> But take out a loan, and these days you’ll pay a single-digit interest rate and no tax; since loans must be paid back, the IRS doesn’t consider them income. Banks typically require collateral, but the wealthy have plenty of that.
The whole reason for the use of "pay their fair share" while never actually defining what the fair share is supposed to be. It's solely about hit & run propaganda. Avoiding discussing actual numbers is a requirement to the politics.
This is a bad deal. Capital makes the marginal worker more productive, not less. You can tax the worker and she will still be better off than if you had taxed the capital, due to greater productivity. (This argument also applies to AI, of course. Since AI doesn't just instantly wipe out all jobs, there will be many workers that will benefit from it and will thus be quite able to fund their governments and social systems.) If you wish to tax some forms of "capital", or rather assets, you should focus on pure rent-generating assets like valuable urban land, or local exclusivity rights to parts of the EM spectrum.
Total compensation involves more than just wages. Providing benefits such as healthcare coverage is inherently expensive, since productivity gains in healthcare have been limited.
At least in the United States we are not getting this benefit.
If AI does begin to really crater the job market, only owners of AI (yes including shareholders) will benefit but most folks do not own stock - or at least do not own any significant amount of stock.
That's not such an ironclad argument lmao. If we are to believe Baumol's cost disease, rising productivity in other sectors is partly responsible for healthcare cost increase.
Obviously I don't seriously believe we should depress productivity so that nurses make less money and hospital stays are cheaper. But, you know, it doesn't make it untrue.
The people you are replying to are trying to have a meaningful discussion by providing references and some basic argumentation. Can you add some link or arguments that explain more strongly your point of view instead of using strong affirmations ('misinformation', 'debunked', 'nonsensical') without any trace of argumentation and no reference at all ?
It's not a matter of a "deal" to be made or agreed to, it's a matter of paying a fair share of the cost to organize a society. When Capital gets to reap dual benefits of revenue from business prospects and lobbying government directly to set the tax rules, then it can't ALSO offload outlaying to the public good that it DEPENDS on to make a profit.
Avoiding tax through various loopholes that Capital gets a seat at the table to help craft, while benefitting from externalizing the costs to taxing labor is just corruption.
No, that's been a common proposal from economists pretty much since people started examining how economies work. Some places do have a capital gains tax of zero. Switzerland is one of them, and Switzerland is economically more successful than the rest of Europe.
Tax is one of those issues where there are actually correct and incorrect answers, thanks to many hundreds of years of active experimentation and relatively simple/robust theory. But people ignore the correct answers for social reasons.
The correct answer on tax is:
1. Figure out how much money the state needs to supply the services that are in-scope for it to an acceptable level of quality.
2. Aim to raise that much in taxes.
3. Optimize deadweight costs. That is, configure taxes to minimize the level to which the activities being taxed are discouraged and driven either out of existence or abroad.
If you do this sort of thing then you get Georgeism, you get zero capital gains, I think you get zero taxes on businesses, and a bunch of other policies I can't remember right now. The results can be economically very efficient i.e. they make everyone better off. However, almost nowhere uses them because there's nothing in the above three items about social engineering, and governments use taxation largely as a tool of social engineering. And in particular to please leftist voters who use the tax system to penalize wealth for its own sake, and to reward groups of client voters. Many governments also have a lot of trouble defining what's in scope for them and then working backwards to needed tax revenues; they prefer to raise as much tax as they can manage without totally crushing their economies and then find ways to spend it.
> Some places do have a capital gains tax of zero. Switzerland is one of them, and Switzerland is economically more successful than the rest of Europe.
Tax
I live in Switzerland. It's an excellent example of a place without a capital gains tax, because it doesn't have one. I didn't say it doesn't have other taxes!
The type of tax matters a lot. The reason capital gains taxes are bad is that they discourage investment, but investment is how you create wealth. "Creating wealth" is ultimately a synonym for creating material progress. Voters like progress, and so this is a very simple and direct argument, which is why most countries that have capital gains tax it at a lower rate than income. Wealth taxes have different incidence and change incentives in different ways. Basically, they discourage having wealth rather than creating it.
It can create its own problems. Switzerland has had big problems in the past with the wealth tax discouraging the creation of tech startups. The reason is that if you create a company then sell some equity in it to investors, that creates a valuation of your company which is then considered wealth, even though it's theoretical wealth and not liquid. In other words, doing a big VC raise can land the company founders with an unpayably massive tax bill: they literally don't have the money to send the government because it's only paper wealth.
To fix that the Swiss tax authorities had to introduce a new rule that says if you have ownership of a startup, this doesn't count towards the wealth tax. What exactly is a "startup" and what differentiates it from other kinds of business? Whether it is "innovative". What counts as innovative? The taxman decides. That means creating a startup in Switzerland is quite risky as if some random bureaucrat decides your product isn't truly innovative and you do a big VC raise you could be personally bankrupted (or you have to use some of the investors money to pay yourself out each year, which is then taxed as income too pushing you into a much higher tax bracket, etc). There are lots of other practical problems with the wealth tax.
Tax incidence is complicated!
In practice the Swiss approach works because:
- The wealth tax is quite low
- This "innovative startup" hack seems to work out in practice even if it's concerning in theory (tech startups aren't the only way to create a lot of wealth)
- Wealth taxes discourage all kinds of wealth equally, so the effects are diffuse and they don't specifically discourage e.g. getting promoted over company formation over inheritances, which is a distortion a lot of other approaches do create.
mike_hearn: Switzerland has no capital gains taxes and it's great.
triceratops: Ok but it still taxes capital.
mike_hearn: I live in Switzerland. No capital gains taxes are great and everywhere other than Switzerland has a lower tax rate for them than income because we want more capital gains. Also wealth taxes can cause startup founders to be taxed heavily.
There's a bit of a disconnect here. You're arguing against multiple strawmen IMO.
Outside Switzerland the current situation is: regular people pay high income taxes while they work, then somewhat lower capital gains taxes in retirement. Ultrawealthy people pay far less of both because they have ways to avoid them (keep employment income low, borrow against wealth instead of selling it).
In Switzerland, since the wealth is straight up taxed, even if at a lower rate (I ran the Swiss wealth tax numbers myself a while ago and you're right it really is a very small amount. I pay way more in capital gains taxes) there are fewer games. Everyone pays taxes on what they make or own.
The startup wealth tax problem has another solution: allow payment in non-voting startup shares, instead of liquid cash. The shares go into a sovereign wealth fund. The government either reaps a windfall eventually alongside the founder, or it misses out on tax revenue it shouldn't have collected anyway (if you look at it from the fairness point of view).
You're right, the origin of this thread was making an argument about all taxes on capital, not just capital gains. I missed that, I guess because nobody mentioned wealth taxes specifically and it's fairly rare for taxes on capital to mean anything other than capital gains tax. Mea culpa.
> The startup wealth tax problem has another solution: allow payment in non-voting startup shares, instead of liquid cash
This is an excellent idea! Did you come up with this yourself or have you heard of others proposing it?
I came up with it myself. It's possible there's prior art but nothing that I've read personally.
I don't think it's a particularly revolutionary idea because sovereign wealth funds already exist. Improving productivity means using less labor which means lower income tax revenues as time goes on (and that's what you want - higher productivity, fewer labor inputs).
And yet, the government needs revenue. What's growing? Wealth. Liquidating wealth to pay taxes is problematic. Hence the sovereign wealth fund. You can apply this to most forms of wealth - even publicly traded stock, real estate, crypto, and artwork.
I've proposed it on this site several times in the past.
Why does it matter whether the value of the shares is observable every day, like a public stock? The value of the shares is quite defined at the time the tax is due. We know this because the government has a specific number in mind for valuation for tax purposes.
The shares are illiquid and that poses a problem for the taxpayer because the government only accepts cash. If instead they could sign over an equivalent number of shares then morally (and arithmetically), they've paid what they owed.
The government may subsequently choose to dispose of the shares on a secondary market, if one is available. Or it may hold on to the shares until there's a liquid, public market for them. Or it may never sell. It all depends on how the sovereign wealth fund is managed and structured. Way smarter and more knowledgeable people than me would have to design how the fund actually works and prevent market manipulation and insider trading.
Investment is not how you "create wealth". An actual worker somewhere performing their job is what creates wealth. Yet when that worker is paid for the wealth actually produce, we tax that heavily. So if you want to encourage productivity, regular income ought to be taxed higher than passive investment.
The argument for low capital tax is that if it's high, the people with the capital - who, crucially, need someone else to use it to make money from it - will just hoard it. For one thing, the obvious glaring issue with it is that however high the capital gains tax is, so long as the owner of capital in question still gets to pocket some of the wealth produced using it, they still have an incentive to continue - something is better than nothing. The actual, real world threat is that some other jurisdiction sets the tax rate lower than you will, and capital will then move there. But this same threat applies to many other taxes, capital gains aren't special in that regard.
This is the kind of semantic argument about words that makes anything other than flat personal taxation an endless rabbit hole.
When people talk about wealth creation they mean the creation of new wealth. Filling potholes isn't normally described as wealth creation because it's sustaining activity. You can choose to define wealth creation differently, that's fine, but it makes the term useless because it'd become synonymous with any kind of work.
Additionally, there's no real world difference between investors and workers. The idea you can separate capital as a class of people from workers is a Marxist concept that doesn't make any sense outside that broken ideological framework. The classical example: if someone owns a food stall, are they capital or a worker? If they pick up that stall and cart it to a bigger town down the road, is the act of them hauling their cart along the road work or an investment? You could argue equally well both ways, which makes the distinction just a distraction.
> however high the capital gains tax is so long as the owner of capital in question still gets to pocket some of the wealth produced using it, they still have an incentive to continue
Not at all! This is the kind of weird prediction that false distinctions between capitalists vs workers causes. It's why Marxist economies always fail. Investment is work and it also requires taking a lot of risk. If you confiscate 99% of someone's ROI nobody is going to say oh well, at least I got 1%. They're going to give up investing at all because the act of making the investment not only took effort, but also meant they could have lost the whole shebang.
If there was no difference between capital and labor, then capital gains and labor income would be taxed at the same rate. That's just the empirical argument. The theoretical is left as an exercise to the reader.
I feel like you have only a cursory understanding of finance, economics, and taxation. If you didn't, you would't ask questions such as
if someone owns a food stall, are they capital or a worker?
It reads like you're trying to find evidence that reinforces your priors while dismissing whole swaths of empirical and theoretical work that would immediately challenge it.
For context, I spent a decade as an M&A banker, so as far from a Marxist as one can be.
Isn't a wealth tax just an expanded capital gains tax?
If last year I had wealth X and this year I have wealth X+Y, I have to pay a wealth tax on the gains, in addition to the the tax on the amount I had previously.
- Wealth tax is much lower, think a percent of your wealth or less vs 20% of your gains.
- You can avoid wealth tax by spending. If you sell a bunch of shares to earn $100k then take a year off to see the world, you pay no tax on that (other than sales taxes etc).
- In practice a lot of things aren't covered by wealth tax. If you spend on a fancy new TV it's not measured. Only the big ticket items are wealth taxed (houses, financial assets, art, cash piles, etc).
The Switzerland model is unique in several ways, both in its history, which cannot be replicated, and in embracing of...questionable financial services.
It's unclear that the model can be replicated generally, let alone whether it should. Importantly, there may not be sufficient demand for banking services like the Swiss provide.
Your three step plan says nothing about how much should be taxed at the personal vs corporate income level, or on the gap between capital gains and labor income taxes.
I'm not arguing for higher tax revenue overall. I don't believe in that, but I also wouldn't even need to make the argument even if I believed in it.
The simpler, more defensible argument is that taxes on capital gains must be much closer to income taxes. Historically they were, even in the US, and we seemed to be fine.
The idea Switzerland's economy is dodgy or dependent on banking is an urban legend. Only 10% of Swiss GDP comes from finance at all and that includes everything, including insurance and pensions. Private banking is only a fraction of that, and private banking with anonymous accounts - which is what people tend to mean by this - was a tiny fraction of that again.
Meanwhile, financial privacy isn't inherently questionable. The USA did a big push in the 1970s to strip privacy from the financial system which until that point had been the default. That was the birth of the concept of money laundering, created as part of the war on drugs. The approach failed as drug cartels found ways to launder money cheaply enough that it wasn't a big friction for them (normal estimate, it adds ~10% to their costs). Not everyone thought that was a great tradeoff, and the Swiss numbered accounts had been used by people trying to hide from the Nazis.
At any rate, the USA forced their concept of anti-money laundering on the world (not that most countries needed the arm twisting) and Switzerland has implemented exactly the same policies as everywhere else for decades. It has no special rules with respect to banking for a long time now.
> Your three step plan says nothing about how much should be taxed at the personal vs corporate income level
It's a set of principles for answering those questions, not the full set of answers.
It's been years since I looked at this but IIRC the general agreement is that you shouldn't bother with corporate/business taxes, because they're both an indirect/inefficient way to collect tax (all taxes are paid by people in the end), and easily avoided.
It was for this reason that the designers of the EU's taxation system originally configured corporate taxation to be collected wherever the nameplate was (i.e. an arbitrary location chosen by the company). The assumption was that with time individual countries would compete the corporate tax rate to zero, fixing the underlying inefficiencies. Of course what's actually happened is some of the countries try to gang up on the others to try and force them to stop lowering taxes. It's not a stable outcome, politically.
In practice business taxes are popular because politicians view them as a way to tax citizens of foreign countries. That has bad effects too but schools either don't teach economics or don't teach it properly in most places, so there are lots of weird hacks like this where something that creates more harm than the alternative gets preferred because people can't resolve the harm to the root cause.
An ideal LVT would tax the full economic rent of the land, but that's unlikely to happen. We don't want to overshoot 100% because that would cause land abandonment.
So in theory, LVT could collect more tax than the state needs to fund services. If that happen, it would be distributed as a Citizen's Dividend.
I am skeptical that we wouldn't be able to find a productive use for government spending, but that's a discussion for citizens of a Georgist state to have.
Also, Georgist policies would discourage the existence billionaires and other people with extreme wealth simply because a lot of their wealth came out of economic rent.
I never understood this Georgist argument. The richest people in the world today require very little land. Remote working is easily possible and plenty of companies use it, even if managers don't always like it. This feels like a medieval perspective.
Georgists aren't frozen in time, nor had they ever been limited to just taxing "land". We consider any economic "land" fair game. We even discussed network effects that allow companies like instagram retain a monopoly.
In any case, California are where some of the most powerful tech monopoly are located, and not coincidentally it's also where some of the most expensive land there is.
Just my opinion as a Georgist amongst many, I would categorize copyright and patents as non-reproducible privilege rather than economic land though non-reproducible privilege also describes private ownership of land. It's very clear that it's artificial, as ideas do not suffer from the exclusivity problem that comes with owning physical land. What IP has in common with owning land is the extraction of economic rent.
Economic land is anything that's fixed, finite, and not man-made, such as land, the electromagnetic spectrum, and orbitals.
Services like amazon and instagram are something of a puzzle to Georgists, but it's at least clear that Amazon and instagram benefits from labor and effort of the platform users. Without people selling on Amazon, there's no amazon. Without users, there's no reasons to be on instagram. To be perfectly clear, platform companies obviously put in labor to build their services, but the network effect isn't entirely of their own making.
How much debate about this stuff still happens, outside of academics who need to publish or perish? From a quick check the only papers being published on this stuff are all variants of "if we add another variable <X> to some model we can conclude the difference in tax incidence is <Y>" where Y is some minor variant of pre-existing beliefs that may or may not hold in reality. Outside of that there are occasional flareups caused by old-guard left wing politicians or activists getting into fights about it with economists, and not much else.
A lot of the debate on this topic is tedious anyway because it revolves around semantic distinctions that only exist in specific kinds of ideological discourse.
If their argument were true we should set them as far negative as possible - we should tax 100% of labour and give all that money to capital owners. Which is kind of something that's already happening.
> Capital makes the marginal worker more productive, not less. You can tax the worker and she will still be better off than if you had taxed the capital, due to greater productivity.
Point one: higher productivity is not necessarily our goal. I could think of numerous industries that would make the world better if they did less work.
Point two: There's a moral absurdity in taxing the wages earned by labor more heavily than the returns earned by ownership. One is tangible effort, the other is an abstraction backed by law. If anything, taxing capital should be the baseline, because it's the least tied to survival. Historically, when America was at its most broadly prosperous, capital gains and corporate profits were taxed at far higher rates than today.
Point three: AI intensifies that calculus. If AI is deployed by capital to further replace or devalue labor, then taxing only the worker is punishing the displaced while rewarding the displacer. That's pure extraction. If we want social systems to survive, the burden has to fall on the owners of the machines, not the people being replaced by them.
Genuinely one of the largest and most destructive ills of our society right now is that so tremendously more of our shared prosperity as a system is directed to those who do the least to create it.
It's both. You don't want to tax capital and income. VAT and sale tax are a bad idea too, especially since they're regressive.
So, what do you tax? You tax land and land-like things, non-reproducible privileges(like patents and copyright), pollution and other negative externality.
Now, there's an argument to be made that we couldn't possibly be able to fund governments on the back of these taxes. Fair enough, but it should mean we minimize those taxes until the economy grows enough to fund government services.
> The fact that capital owners successfully avoid contributing to the financing of our states and social systems is
Are you sure capital owners do not contribute to our states and financial systems?
For instance, Jeff Bezos is worth $238 billion even though Amazon has a $2.6 trillion market cap. That's $2.4 trillion of value created for other shareholders plus trillions more for employees, customers, suppliers, governments, and other stakeholders.
Jensen Huang is worth $164 billion while NVIDIA’s market cap is $5 trillion. That’s $4.8 trillion of value for other people (ignoring value created for non-equity stakeholders).
etc.
I'm not saying that there should not ALSO be other ways to force contribution (e.g. via taxes), but to say they do not contribute at all is false.
Well, you are assuming there is a central benevolent dictator who can compute "Value" more accurately than millions of people collectively voting with their wallets.
If AGI is actually attainable, then, sure, planned economies will be more performant than market economies, especially for high value industrial captal equipment. No need for Gosplan to decide on your candy bars and craft breweries.
A market economy is a distributed compute engine. The main reason why planned economies do worse historically is because the amount of compute needed to actually account for everything centrally is so immense (and thus costly), the implementers necessarily have to adopt some kind of simplified model, and then you get divergence between what the plan says and what's actually happening.
It's not a given that this will remain true forever, although I don't think it's tied to AGI. One could argue that AGI push is the trigger for a massive increase in compute capacity and corresponding decrease in price that might make this kind of thing viable, but that's just wishful thinking, not a fact.
It's implicit. Amazon has billions of dollars because customers freely handed over the money. We know they found the service valuable because they wouldn't have done so otherwise.
The poster is suggesting there is some _true_ value separate from what these customers who know their own situations best think. That they are secretly being fleeced and a central planner will somehow better allocate the resources.
"The ultra-wealthy should have less power" != "We should implement a five-year plan for our command economy as thought up by glorious and correct Party."
If I run around town smashing windows with a rock, GDP goes up. Computing value more accurately than financial markets is not difficult: the bar is on the floor.
Breaking windows DOES increase GDP, just like the parent said. The argument ( https://en.wikipedia.org/wiki/Parable_of_the_broken_window ) only argues that not all GDP increase is good, because of waste of resources, because of the opportunity cost. That's why measuring success only by GDP is a bad idea.
One thing to point out that is lost in these arguments of “they create value for the shareholders”.
Folks that own a vast amount of stock do not pay taxes on that stock. They own the shares, and they take out loans against those shares. At some point they rollover or pay off those loans by selling some shares, but the shares have increased in value significantly in that time, or they’ve been granted new shares.
When we say “<business> has created value for shareholders”, it’s said in a way that implies that somehow that wealth creation makes its way into the tax system by virtue of the fact the wealth was ‘created’. It does not.
First, taxes still get paid when the individual dies as estate tax. Second, increased shareholder value typically means more corporate profit which is also taxed. Third, dividends are taxed. So your claim that the shareholder value never makes its way into the tax system is plainly false.
This is all aside from the fact that increased shareholder value means a more abundance society regardless of the increase in taxes. We could quibble over the exact distribution of who gains from the enlarged pie but it's certainly not the case the 100% of it goes to capitalists so consumers and employees also benefit.
> taxes still get paid when the individual dies as estate tax
Almost no one in the US pays the estate tax. It only applies to estates over $14MM and most large estates get reorganized into trusts with estate tax avoidance as a primary motive.
> That's $2.4 trillion of value created for other shareholders plus trillions more for employees, customers, suppliers, governments, and other stakeholders.
That's not Bezos' doing alone, that's Bezos plus over a million workers that did that. If Bezos never existed in history, someone else would have filled in that market. We need to stop this myth that a few men alone create all this value and that without them we'd still be dragging plows through the mud for our farms.
This is a two-edged discussion. On one extreme, there’s an interesting Marxist idea that value creation is largely the product of historical and social forces, not just individual effort. However, I don’t think it’s fair to single out AI, or any billionaire to fit that narrative while ignoring other factors, such as the idea that nations should not exist since they can be thought in the same terms.
On the other side, Jeff Bezos is clearly an outlier. Even if we agree that ecommerce would have existed without him, we don’t know whether someone else would have created the same scale of value.
But we know that there are few winners and past competitors like eBay faded out. It is more extreme with Microsoft: they have survived more market shifts than anybody else, there is no doubt they have something special and at that business level it is difficult to argue that competitors have not tried everything, and the idea of good and bad behaviors is naive at that level. For example, a "good" company such as Sun Microsystems was involved in bribes to gain markets.
I would say they dont contribute. I don't think Jeff Bezos has contributed anything positive, at all. He's managed to become insanely rich in a system that rewards bad behavior, so what? All that value isnt doing anything.
Are you saying Amazon isn't a positive? Or that Bezos didn't contribute to making Amazon what it is?
I think it's pretty clear Amazon is quite a positive given by how many people like using it so much for it's convenient 1-stop shop, quick shipping, and hassle-free return process.
Are you saying it would be better to have to shop at 1000 different little websites with probably crappy or at least inconsistent return processes?
OK but how realistic is that? Not everyone lives in a city nearby local stores.
There is such a wide variety of products that people go to Amazon for. I know I do. So many things are niche I can't see how any local stores could exist to stock things like that in even a 1 hour range from a majority of the population.
How many people are going to drive hours to go to a special boutique that has this random thing they want or need?
Maybe people use Amazon to buy routine things that could easily be stocked locally. But I guess I use Amazon to get things that I can't really get or even usually find anywhere else for that matter. Most come from small operations using Amazon as their sales platform. Amazon is providing a lot of discoverability and logistics to them and I am not sure I would even stumble across the seller if I had to find some tiny website that they operated themselves.
I am not sure most people would prefer to shop locally, most people don't seem to even go to the store anymore and instead use delivery services for everything. This saves so much time to allow us to do other things that we enjoy in our lives. I don't think small shops would be able to offer this level of convenience.
And you don’t have another big online marketplace that’s basically similar?
And if not, you are saying you have a similar availability of such a vast network of goods, almost anything you might want and the convenience of fast delivery and simple returns via local shops or something?
I guess I’m not sure what you are suggesting. I personally find that shopping and finding and acquiring the products I want is vastly more convenient and easier with Amazon than before we had Amazon and yes I was around back then too. I’d never want to go back personally. Most family and friend I know seem to feel the same.
Absolutely. Creating value in the stock market is not the same thing as creating value for society. Are we really better off as a society now that amazon has closed down all the mom & pop stores?
Are we really better off as a society now that the entire internet is centralized around AWS? It made a lot of people rich, but the internet sucks more than ever
> It’s much easier to tax the general population than businesses, as they don’t push back as much.
Businesses don't pay taxes. People do. Every dime that a corporation pays is a reduction of capital returns to shareholders, or a reduction of investment into business activity, both of which are taxed again by the people who ultimately receive the capital.
Yep, concentration of wealth leads to a smaller group of people that buy their way out of taxation leading to further concentration of wealth and services falling apart for the masses.
Businesses can play the game where they shop around various municipalities and get them in a race-to-the-bottom on tax breaks if they move their business to their community.
That is the opposite of a problem - it emerges because we have tools that make things more efficient than just throwing toiling bodies at it. We had economies which were based upon it, it was called slavery. Capital compounding its gains through better capital is how we get progress. The presense or absense of the capital advantage is part of what separates third world wages from first world.
The industrial era problem isn't capital but that economies of scale encourage consolidation heavily and make running small business an even more uphill battle. There is at least a counterbalancing force of competitive pressure and antitrust to promote some splitting for innovation's sake as opposed to just one big stagnant monopoly winning out just because it is biggest.
This covers federal income taxes only, excluding payroll taxes such as Social Security and Medicare. Including those the top 1% pays ~25% of all federal taxes while earning ~22% of all income.
Top 1% have more income (income inequality is a thing). Taking away 40% income would hit the bottom 99% much harder than it would affect the life of top 1%. 50% of renters spend >30% on housing, 25% spend >50%.
40% figure is also based on individual income taxes. It drops significantly if you consider other sources (payroll etc).
Top 1% also receive preferential tax treatment and benefits disproportionately from policy changes.
Income is what you earn from your labor (the things robots will do in the future). Capital is setting money to make more money (e.g., by buying robots to get rid of labor that earns income).
You're missing the point. The effective tax rate of many billionaires is lower than ours. "Musk with a fortune of $244 billion, paid an average effective tax rate of 24% from 2018 to 2020". In other years it was as low as 3%[2].
Are they though? At least for AI/software the last 30 years were fantastic to have universal access to means of production (compilers, tools, operating systems, models, you name it).
I am more worried about the capability of people to use the free means of production (more precisely improve education) rather than the concentration.
Edit: and to remove any doubt, I do agree that taxation of capital is completely badly done now, but I do not think the capital is about owning the means of production but about the capital (effort) required to organize people to use the (mostly) free means of production.
The fact that people think, capital owners who actually provide employment and produce useful things and do better the better they serve the consumer even when their motives aren’t altruistic (and when they are altruistic it is even better) should be taxed more so the giant government corporation can make bureaucrats pockets fatter and waste a bunch of money doing inefficient things is more of a fundamental problem.
Capital owners don't produce useful things. Their workers do.
And so you can easily turn that argument around: the workers who actually produce the useful things are, for some reason, taxed higher than the owner who didn't lift a finger to produce anything, but is entitled to all the profits by virtue of being the capital owner.
I was so with you the first half of that. But the notion that everything should be capitalism is just as wrong as the notion that nothing should be capitalism (or, that capitalism only leads to bad things; obviously wrong but somehow a broadly accepted truism).
Capitalism works when a market works; capitalism fails when a market fails. Healthcare is a great example, because there’s an obvious and inherent imbalance in demand vs supply. Firefighting is another great example. These also have externalities to the community as a whole that everyone gets, even when you don’t pay/need the service; so it makes sense to make everyone pay (taxes). Even if you never have a child, even if you send your kids to private school, you live in a society that could only exist because of a (formerly, relatively) high standard of public education. So everyone pays for schools.
The idea of government bureaucrats lining their pockets is also (formerly, relatively) ridiculous: who would get into US government bureaucracy to make money? They are all (formerly, relatively) doing it almost uniformly because they believe in the mission, because they would almost all make more money going private.
> The fact that capital owners successfully avoid contributing to the financing of our states and social systems is, in my view, one of the fundamental problems of our time.
Are you talking about taxing unrealized capital gains?
Because for the situation where capital is directly replacing labor, the income generation is taxed regardless of the whether it’s generated by a human or machine.
If I hire people to make and sell hot dogs, they pay taxes on their wages. If I build an automated hot dog vending machine, I still pay taxes on the profits of selling those same hot dogs.
One can’t spend any of the money until it becomes personal assets. So what is not being taxed?
If I keep them in the company, I pay corporate tax on profits (22%) for retained earnings. And then I’d have to pay dividend tax (either 15% or 20%) atop those retained earnings to pay them out to myself as income. Or I pay myself a salary and pay regular income tax on the full amount.
Due to our progressive tax brackets and double taxation of dividends, both options end up with larger tax rates than when dealing purely with low wage human labor. We as a society collect more in taxes from one high income earner than multiple low income ones.
>the US has a law that erases the tax bill for dead people
That is true, but there is a theory, applied very weakly, that supports this. The idea is that a decedent's estate is subject to a wealth tax on its fair market value, therefore to also subject the unrealized gains within the estate to income tax would be double taxation, which is to be avoided. The flaw is that the exemption from the estate tax is relatively high (something like $13,000K), so there would not be any double taxation is most cases, but it's treated that way nonetheless.
In the country I live the 401k equivalent is taxed yearly on gains (and again as income when I retire), and I think that is fine - I get a world class society in return (you guessed right, it is a Nordic country)
so the answer is yes.
However, i did not go as far as proposing anything. You are assigning value on my statement.
I merely pointed out that it is a mute point to say that you can not use your unrealized gains.
When those unrealized gains are spread across 10s-100s of millions of people it's fine because statistically gains are always being realized. As those holdings get further concentrated that stops happening.
Of course, as long as the tax is progressive. Custodians of assets almost all charge an annual feel on unrealised gains, it’s hardly a foreign concept…
> capital owners successfully avoid contributing to the financing of our states and social system
Say what now? So i've been paying cap gains tax like a chump while there is a "no thanks" option you're aware of? Please tell me where to tick that box.
Tax not paid by ultra wealthy goes back into he system as loans that extract interest that in turn is used to buy assets sold to pay for interest, those are then rented back to the system to extract more interest.
In essence by allowing no tax to be paid by the ultra wealthy, we facilitate the death of the middle class and transfer of everything to the very few - with mathematical precision.
Ultimately we need to ask ourselves why we have a society, what's it's purpose.
While I probably prefer a society that is more "for the many", I can't exclude the possibility that some people have different preferences and would not want to impose my opinion.
Considering this, everybody might have to make (at some point in their lives) hard choices regarding where they choose to live. Yes, one should fight to improve the society one is living in, but there is also a saying "only the fool persists in their folly" ...
What's crazy is that productivity per employee just keeps increasing year after year, but successive neoliberal governments continue to lower corporate taxes. They should be doing the exact opposite! Taxes should be raised as productivity increases! AI is just one more tool that gradually increases productivity, among others.
It has a finger on the long term trend of decreasing relevance for labor and increasing relevance for capital as factors of production, but it's certainly not a metric I'd choose and that's why I tried so hard to steer towards something better.
One can imagine a world where productivity increases, the need for old jobs is reduced, but newer, better jobs more than replace them because the economy is experiencing genuine growth. Self-serving capital rhetoric will push you to always imagine it this way, self-serving labor rhetoric will push you to never imagine it this way, but good policy lies in figuring out what's actually happening in aggregate and responding accordingly (the framing I tried to push).
No it’s not. If the increased productivity is realized by multiple industries, then they all compete on price and the price of their goods comes down. That means the consumers of the product capture the gains in productivity.
Farmers using machinery instead of labor has meant cheaper food for everyone, not rich farmers.
I think that if we look at inflation-adjusted productivity, and inflation-adjusted average income, then that would indeed prove increasing inequality, right?
I believe the chart in this link is adjusted by inflation. Showing overall the same trend:
It's not productivity itself; it's the decoupling of productivity from wages. If I'm creating 3 times as much value as my equivalent in 1970, why aren't I getting paid 3 times as much inflation-adjusted money, hmm? It's not even unfair to shareholders - they'd also get 3 times as much as in 1970. But instead they get 10 times as much and I get 0.7 times as much, or something like that. What's the deal?
> If I'm creating 3 times as much value as my equivalent in 1970, why aren't I getting paid 3 times as much inflation-adjusted money, hmm?
Because that increase in productivity comes almost entirely from technology owned by your employer.
To look at it in a contrived example, let's take textiles. There is a textile factory employing weavers who weave fabric by hand, and the factory owners buys a new automated weaving machine that makes the weavers each 3 times more productive. The maker of the machine created the technology, and is paid for it, the owner of the factory made the investment to bring the technology, and profits from it.
This is basically exactly what has happened to modern productivity.
Except in technology where the gains come from my personal investment in skills. I'm spending hours every week keeping up with the field of software engineering. I've been investing in learning my craft since I was 14 or so.
I'd argue the same goes for many types of digital creators, artists, video editors, animators, and so forth.
> Except in technology where the gains come from my personal investment in skills.
Not really. That's essentially a weaver learning to use the new automated weaving machine. That is what you do to remain qualified for the job. Now, if you were a framework or key system creator, building the underlying platforms that get adopted throughout the industry, I would agree. But just learning to use the tooling the the industry creates isn't that different, other than the rate of change you have to keep up with.
A weaver who knows how to use an automated weaving machine produces 3 times as much cloth as one who doesn't, so why don't they get paid 3 times as much? This is the problem of the decoupling of productivity and wages. It started happening at precisely the moment the gold standard was ended - weird.
> A weaver who knows how to use an automated weaving machine produces 3 times as much cloth as one who doesn't, so why don't they get paid 3 times as much?
An automatic weaving machine, operated by a capable operator, produces 3 times as much as a manual weaver. The productivity increase is the machine, not the operator. That's my entire point.
The owner of the machine reaps the surplus, not its operator.
> This is the problem of the decoupling of productivity and wages. It started happening at precisely the moment the gold standard was ended - weird.
You'll get no argument from me about the ills caused by the financialization of the economy, but I don't think that's what's going on here.
If productivity increases, margins increase. When margins increase any business in a competitive environment will have to lower its prices in response to any other business lowering prices that got those automation gains.
Productivity increases result in lower prices in any competitive market.
True, but good luck getting people to vote for their own interests. It's not hard to fix this. It really isn't. But it's nearly impossible to get through to people. As someone else said, at some point you have to make a choice about where you want to live and do what it takes to get to that place before you drown in the sea of marching morons.
It's the ultimate capital amplifier. The end goal - AGI - essentially means the ability to derive wealth from capital directly, without any pesky middlemen such as laborers who need to be paid. The endgame is capital without labor.
But, of course, in such a society, the people who don't own the robots - i.e. most of us - become "economically unnecessary".
It removes a layer of abstraction from capital to production. With AI the only question is if the compute is available to purchase, once it is, you can produce with it.
Of course, the question then is who is consuming the production, but we're not quite there yet.
Most of the capital is owned (through pension funds and then different investment funds) by completely ordinary people who put their completely ordinary savings into it and get completely ordinary pensions out of it.
So you are effectively suggesting to forcibly take their money from them and then give it back, but through a corrupt and bureaucratic system of the state.
> The fact that capital owners successfully avoid contributing to the financing of our states and social systems is, in my view, one of the fundamental problems of our time.
So the government is going to fix this, right? Right...?
Most governments in the world exist to protect the interests of capital owners. Which makes sense - the creation of states in the first place was an act of, shall we say, radical capital acquisition.
The government is fiscally irresponsible fundamentally because the rich have successfully lobbied to prevent taxes from being collectible in sufficient quantity to balance the budget. Once you're at the point where the gap cannot politically be closed - "responsible" budgeting is just an exercise in posturing and lobbying exercises.
You tell me. It's not like the other party is doing better. California is posting a $18 billion deficit next year, despite the highest taxes in the country, and despite record tax revenue from the AI boom.
When Trump did the whole tax cut thing in 2017, it massively blew up the national debt. This is because the rich got massive tax cuts.
The government is fiscally irresponsible by design, because the government is ran by the plutocrats with all the incentives to give themselves more money at the cost of everyone else.
It's hard to truly comprehend the damage Red Scare did to all of our collective lives. The Post-WW2 era utterly destroyed the labor movement and pretty much any form of collective action. And all but about 10,000 people are worse off for it.
So many commnents here, yours included, make perfect sense when you simply look at them through the lens of the workers' relationship to the means of production.
Automation could be a good thing. It could mean we need to do less work and have more leisure time. Instead it gets concentrated in the hands of very few so they can become even wealthier. And the resultant layoffs are used to extract free labor from the people who remain and suppress their wages, all to eke out more profits.
I find it ironic that individual income tax is a thing in USA, but as soon as AI does the work, oh only the owner has to pay.
As a libertarian, I find the whole requirement for workers to secure an accountant and file individual income taxes under threat of retaliation silly. Individuals should be free to engage in activities like working for an employer, taking care of their kids or aging parents, or having sex, without paying tax to the government. Taxes should be levied on companies and robots, not humans doing everyday things.
The employer knows exactly how much they are paying each employee, and they already have accountants on staff. Why create "bullshit jobs" just for employees to file this same exact information again?
So yeah, we shouldn't wait for AI to replace workers, to abolish the individual income tax for individuals. It should have been done a long time ago. Employers can pay the tax (as they do with FICA). And in fact, we're going to have to have a tax regime that taxes robots, which would become the primary economic actors soon anyway. If corporations can have legal personhood, surely robots can too LMAO.
Looking back at the degrading lives commoners have suffered throughout a lot of human history, I'm pretty split. And that was before rulers had AI and autonomous defenses to keep everyone in line. Frankly, I think this exact line of thought is what's pushing a lot of AI investment right now.
I share your concerns, but also I don't think this analogy is very close. Historically the reason why commoners could be kept oppressed is because the relative amount of "firepower" available to individuals was fairly small to begin with, and easy to regulate. Many places banned military weapons like swords for the commoners, for example, precisely so that they couldn't quickly form a militia capable of challenging their feudal lord's retinue. I don't think that's possible in the modern world, though, because even with heavy regulation of arms, the stuff that's readily available (or can be put together from things that are readily available) is already too destructive to contain.
The modern rulers rely more on brainwashing and less on direct oppression for this exact reason. Not that the latter doesn't happen, mind you, but I also can't think of any modern day regime that is sustained solely by force, without some measure of popular support.
It just took some guns to conquer South America. Flying drones with AI targeting will be too much for regular people. The rich will have access to this service.
Give unto Caesar that which is his, and let God handle the rest. The base case for the inductive proof is alarming, and I can’t see it ending well.
A bit of a tangent, but the more complete reason depends on what civilization (Aztecs/Incas), the common factor is an extreme loss of life due to old world disease.
Additionally, for the projectile velocity at the time the gambeson-like garment the Aztecs had available was surprisingly effective.
The top 1% already pays more than 40% of all federal income tax at a 26.09% effective rate. The bottom 50% has an effective rate of 3.7% and contributes only 3% of all tax revenues.
They don't get money through income! They get most of it through capital gains or unrealized capital gains which are taxed at special low rates and zero rates respectively.
It's transparently self-serving and completely indefensible -- though I'm sure you'll try.
If we limited individual wealth to $999 million--just outright capped it, and enforced that--it would not impact these people in the slightest.
What it would impact is how easily these people could influence the political system and get themselves out of trouble.
At $400 billion net worth, Elon Musk could retire one hundred thousand times. He literally wrote multi-million dollar checks to various politicians and ran an illegal pay-for-votes scheme in Pennsylvania. And he'll face zero consequences for it.
The tax is his shares, those shares become public assets, the government and (ostensibly) the citizens finally get a say in what the hell is happening with that guy.
You have a vendetta against a guy, for grievances, some legitimate, and want the law to change, specifically to get him, because you hate what he says. You also want to nationalize his businesses, that he built, that he did not have to build, that now employ 140,000 people, that he did not have to employ, with those 140,000 people almost all being high income earners paying higher tax rates when they may not have otherwise, out of your hate.
I would call that greed and a despicable position.
On that note, it's also completely pointless. If you were to literally liquidate every billionaire in America, every single one, and somehow got current market rates for every single stock share, 100% tax rate beyond $1B... we would cover the deficit for 3 years. With everyone else still paying taxes. Then we're back to square one, running a $2T deficit every year with no billionaires to liquidate. It's entirely catharsis that accomplishes nothing. If such a tax were even passed, we wouldn't make it to the next election cycle before it's a problem again.
> If we limited individual wealth to $999 million--just outright capped it, and enforced that--it would not impact these people in the slightest.
It would certainly impact their willingness to do the company-building that creates all those innovations and jobs.
With such a rule, Tesla wouldn't exist, no electric cars, no SpaceX, no cheap advanced launch tech; basically most of the modern world would be choked in the crib by taking away the incentive to build it.
If some person isn't willing to do company building because they are already at the cap so it won't make them any more money, that just means that someone else will do that. We have a planet of 8 billion humans; there's no shortage of human talent.
This is an untested assumption, as it takes quite a bit of CapEx without return to start a rocket company, or a tunnel boring company, or a car company.
> How about the rich say that 50% of the economy should pay their fair share?
How exactly do you propose that they pay their fair share when they literally do not have the money or assets to do so? Are you proposing modern day slavery? Perhaps people selling their family? I'm curious what happens if you take this line of thought to it's actual conclusion.
How about instead of taxes, we have a $10,000 per year subscription fee to live in society.
Maybe different depending on area, like $20,000 a year to live in NYC but only $2,000 per year to live in a rural village.
If you can't afford the fee that's OK, it just means you have to live outside of the developed areas and don't benefit from any services provided by the government. But you are free to set up a tent in the woods and live off the land.
Even if you were to liquidate every billionaire in America, at a 100% tax rate above $1 billion, and were able to sell the shares at current stock prices without a collapse, you would pay for the government deficit for... 3 years. Because their combined wealth, on paper, is $7T while we're running over $2T shortfalls every year.
3 years of not taking out debt, while still needing everyone else to pay current rates. Then you're back to square one. Sans billionaires and sans any major capital investment anywhere.
1% of Americans control 30% of the wealth of the nation, and apparently 12% of property.
It's more than reasonable that people with that much wealth to their name pay the vast majority of the taxes, as it used to be.
From a nation building perspective, there's no reason to allow a couple hundred people to wield 52,000,000,000,000$ worth of assets. It means the economy has gotten far too clumpy and needs some redistribution. This isn't even really all that anti-capitalist. Capitalism can't survive long term without budding up against a government that regulates it.
.1% hold 12.6% of national wealth so that's 300,000 people. It tends to clump at the top, apparently.
In any case, it seems a bit bizarre to me that the wealth is distributed so unevenly. Do you believe those 3 million people work so hard that their value is that much higher than the combined output of 297 million people?
To be in the top .1% you need a wealth of about $60m, certainly nothing to be worried about, it gives you a very nice standard of living.
But it's a lot nearer to someone at the 90%ile wealth of about $2m than the kind of power that those with $1b, let alone centi-billionaires, have. You're talking top level entertainers (actors, sportmen etc)
Good point, maybe the more important statistic is that there's 900 billionaires in America, representing about 7 trillion in collective wealth. The USA GDP is 30 trillion... the situation just seems inherently wrong to me.
You are comparing a stock to a flow. Billionares in the US don't make $7 trillion per year. They accumulated that wealth over their lifetimes. If you want to compare apples to apples: The net worth of the US (as much as that concept can make sense) is around $176 trillion. That includes $269 trillion in assets and $123 trillion in debts.
A capitalist system is built on the idea that holders of capital actually deploy that capital, rather than horde it.
If capital holders don’t actually deploy that capital and compete with each other, then you don’t have a capitalist system anymore. You have a feudal system, where asset holders extract resources through rents, rather than capital deployment and risk taking.
"Is the capital being deployed for rent seeking or for taking economically useful risks?" is a judgement call. You won't find it listed in a FRED time series.
When every industry is on a multi-decade streak of consolidation, when McDonalds is about land speculation rather than serving food, farming is about land ownership rather than growing food, airlines are about credit cards rather than transportation, it's not unreasonable to believe that a substantial amount of capital is being deployed towards rent-seeking rather than economically useful risk taking.
I don't think they were thinking of "no government", rather something like "government working in support of capital" (see 2008 financial crisis bank bail-outs; enforcing private ownership and protecting accumulated wealth).
Governments are fine. Any group of people large enough to not be a hivemind on everything has a government. Even if they don't formalize it, it will still emerge organically as they run into issues that require consensus on actions.
The crucial difference is between the governments actually run by the people, and the governments that claim to "represent" them.
How little imagination we have anymore! Its like you discover ice cream but for some reason only chocolate ice cream. Someone is like "chocolate is no good" and all you know to think is: "Oh so you guys just dont want ice cream at all?!"
Very well put. I am working on tooling that will likely increase developer productivity by a large factor; and will most likely be used to lay off more developers as their labor is no longer required.
I often ask myself whether that is ethical or not. But in the end, it’s not the tooling that’s unethical. Productivity increases are good for everyone, under normal circumstances.
It’s the fact that all the gains are being collected by the already uber-wealthy that’s wrong.
> I often ask myself whether that is ethical or not. But in the end, it’s not the tooling that’s unethical. Productivity increases are good for everyone, under normal circumstances.
So if I'm reading your comment right, you think it would be ethical under normal circumstances, but also believe we don't live under those normal circumstances? In that case i think the answer you're looking for is: it is not ethical to develop these tools under the current circumstances.
The problem isn't the benefits per se, it's that the downsides are shouldered by everyone else while the benefits accrue to 0.1%. At which point it's just stealing from the commons.
> Three: Eliminate the corporate income tax. Completely. If companies reinvest the money into their businesses, that's good. Don't tax companies in an effort to tax rich people.
> Four: Eliminate all income and payroll taxes. All of them. For everyone. Taxes discourage whatever you're taxing, but we like income, so why tax it? Payroll taxes discourage creating jobs. Not such a good idea. Instead, impose a consumption tax, designed to be progressive to protect lower-income households.
Our fundamental problem is not that we don't tax Jeff Bezos. It's that we don't tax the people who have multiple boxes of Chinese goods coming from Amazon to their houses every day.
Taxes discourage whatever you're taxing, but we like consumption, so why tax it? Sales taxes discourage velocity of money. Not such a good idea. Instead, impose an income tax, designed to be progressive to protect lower income households.
Why need production if you don't have consumption? I jest, only partially.
I suppose it's because taxing income is a lot easier to do progressively than taxing consumption.
You can't meter how many times someone has been out to eat or how many gallons of gas they have put into their car, but you can more easily track what their employer puts in their bank account.
Tractors largely replaced human labour in farming about a hundred years ago. Should we have started taxing tractors?
I really have difficulties seeing AI as anything else than yet another type of machinery. If your argument is "but it's replacing ALMOST ALL human labour" - well, the same argument was valid for tractors a hundred years ago (when almost everyone was employed in agriculture).
This argument hinges rather strongly on whether or not AI is going to create a broad, durable, and lasting unemployment effect.
Tractors did not cause this phenomenon because jevons paradox kicked in and induced demand rendered the problem moot, or demand eventually exceeded what mere tractors were capable of doing for agricultural productivity.
The same can probably be said for contemporary AI, but it's tough to tell right now. There's some scant indications we've scaled LLMs as far as they can go without another fundamental discovery similar to the attention paper in 2017. GPT-5 was underwhelming, and each new Claude Opus is an incremental improvement at best, still unable to execute an entire business idea from a single prompt. If we don't continue to see large leaps in capability like circa 2021-2022, then it can be argued jevons paradox will kick in here and at best LLMs will be a productivity multiplier for already experienced white collar workers - not a replacement for them.
All this being said, technological unemployment is not something that will be sudden or obvious, nor will human innovation always stay under jevons paradox, and I think policymakers need to seriously entertain taboo solutions for it sooner or later. Such as a WPA-style infrastructure project or basic income.
> technological unemployment is not something that will be sudden or obvious
I already have friends experiencing technological unemployment. Programmers suddenly need backup plans. Several designers I know are changing careers. Not to mention, the voiceover artist profession will probably cease to exist besides this last batch of known voices. Writer, editor - these were dependable careers for friends, once. A friend travelled the world and did freelance copyediting for large clients.
People keep trying to tie these two things together, forgetting the fact that ZIRP also ended 3 years ago, and that combined with the end of the COVID-era employer credits are when the layoffs really began. I won't say LLMs are having no impact at all on employment, but not to the degree where the job pool has dried up. Companies were encouraged to over-hire for years, and now that the free money is gone, they're acting logically. I believe if ZIRP came back we'd see workforces expand again and AI would just be seen as another useful tool.
Yup, Claude Opus 4.5 + Claude Code feels like its teetering right on the edge of Jevon's Paradox. It can't work alone, and it needs human design and code review, if only to ensure it understands the problem and produces maintainable code. But it can build very credible drafts of entire features based on a couple of hours of planning, then I can spend a day reading closely and tweaking for quality. But the code? It's professional work, and I've worked with contractors who did a lot worse.
So right now? Opus 4.5 feels like an enormous productivity booster for existing developers (which may indirectly create unemployment or increase the demand for software enough to create jobs), but it can't work on large projects on an ongoing basis without a knowledgeable human. So it's more like a tractor than anything else: It might cause programmer unemployment, but eh, life happens.
But I can increasingly see that it would only take about one more breakthrough, and next gen AI models might make enormous categories of human intellectual labor about as obsolete as the buggy whip. If you could get a Stanford grad for a couple of dollars an hour, what would the humans actually do? (Manual labor will be replaced slower. Rod Brooks from the MIT AI Lab had a long article recently on state of robotics, and it sounds like they are still heavily handicapped by inadequate hardware: https://rodneybrooks.com/why-todays-humanoids-wont-learn-dex... )
Jevon's Paradox and comparative advantage won't protect you forever if you effectively create a "competitor species" with better price-performance across the board. That's what happened to the chimps and Homo neanderthalensis. And they didn't exactly see a lot of economic benefits from the rise of Homo sapiens, you know?
"Inadequate hardware" is a truly ridiculous myth. The universal robot problem was, and is, and always will be an AI problem.
Just take one long look at the kind of utter garbage human mind has to work with. It's a frame that, without a hideous amount of wetware doing data processing, can't even keep its own limbs tracked - because proprioreception is made of wet meat noise and integration error. Smartphones in 2010 shipped with better IMUs, and today's smartphones ship with better cameras.
Modern robot frames just have a different set of tradeoffs from the human body. They're well into "good enough" overall. But we are yet to make a general purpose AI that would be able to do "universal robot" things. We can't even do it in a sim with perfect sensors and actuators.
Read Brooks' argument in detail, if you haven't. He has spent decades getting robots to play nicely in human environments, and he gets invited to an enormous number of modern robotics demonstrations.
His hardware argument is primarily sensory. Specifically, current generation robots, no matter how clever they might be, have a physical sensorium that's incredibly impoverished, about on par with a human with severe frostbite. Even if you try to use humans as teleoperators, it's incredibly awkward and frustrating, and they have to massively over-rely on vision. And fine-detail manual dexterity is hopeless. When you can see someone teleoperate a robot and knit a patterned hat, or even detach two stuck Lego bricks, then robots will have the sensors needed for human-level dexterity.
I think it's too early for AI to have impacted software work at a systemic level. There are various reasons the market is crap right now, like how you're (perhaps unknowingly) competing with cheap foreign labor in your own metro centers for tech work.
AI is just the other pincer that will finish the kill shot.
The refrigerator put paid to the shipping-ice-from-the-arctic-circle industry quickly as well. The main shock is for the people who write stuff we read, as they never expected to be in a profession that could be automated away. Lots and lots of stuff has been automated away, but we never heard their voices.
> This argument hinges rather strongly on whether or not AI is going to create a broad, durable, and lasting unemployment effect.
I think GP's argument makes a pretty strong case that it won't, even if AI somehow successfully automates 99% of all currently existing tasks. We automated away 99% of jobs once during the agricultural revolution and it didn't result in "a broad, durable, and lasting unemployment effect" then. Quite the opposite in fact.
Maybe if AI actually automates 100% of everything then we'll need to think about this more. But that seems unlikely to happen anytime in the foreseeable future given the current trajectory of the technology. (Even 50% seems unlikely.)
> The same can probably be said for contemporary AI, but it's tough to tell right now
The same can't even be said for contemporary AI, because lots of the jobs it's going to replace are theoretical or hype. Self-driving cars should've been here years ago, but because AI is extremely hard to improve upon once it gets to a certain level of efficacy, they haven't happened.
The question is: should we be discussing this stuff when AI hasn't started taking all those jobs yet?
I think it's fine to discuss solutions to hypothetical future problems as long as it's clear that these are hypothetical future problems you're talking about, not present reality.
In many of these discussions that line seems to get blurred and I start to get the impression people are using the specter of a vague, poorly understood hypothetical future problem to argue for concrete societal changes now.
> each new Claude Opus is an incremental improvement at best, still unable to execute an entire business idea from a single prompt.
If your way of evaluating the progress of AI is a binary one, then you'll see no progress at all until suddenly it passes that bar.
But seeing that we do have incremental improvements on essentially all evals (and my own experience), even if it takes another decade we should be planning for it now. Even if it does require an entirely fundamental breakthrough like the attention paper, given the amount of researchers working on it, and capital devoted to it, I wouldn't put any money against such a breakthrough arriving before long.
>The same can probably be said for contemporary AI, but it's tough to tell right now. There's some scant indications we've scaled LLMs as far as they can go without another fundamental discovery similar to the attention paper in 2017. GPT-5 was underwhelming, and each new Claude Opus is an incremental improvement at best, still unable to execute an entire business idea from a single prompt. If we don't continue to see large leaps in capability like circa 2021-2022, then it can be argued jevons paradox will kick in here and at best LLMs will be a productivity multiplier for already experienced white collar workers - not a replacement for them.
The NBA has an incredibly high demand for 14-foot-tall basketball players, but none have shown up to apply. Similarly, if this causes our economy to increase demand for people to "execute an entire business ide from a single prompt", it does not mean unemployment can be alleviated by moving all the jobless into roles like that.
We don't need science fiction AI that will put everyone out of work for it to be ruinous. We only need half-assed AI good enough that they don't want to pay a burgerflipper to flip burgers anymore, and it'll all go to hell.
Basic income doesn’t do anything. We already have food stamps and so on. The largest sector of US federal spending is health and social welfare. We’d have to end pretty much all those programs to run a minuscule basic income.
> We’d have to end pretty much all those programs to run a minuscule basic income
Isn't ending all those programs one of the core ideas of universal basic income? Instead of having a huge bureaucracy administering targeted social welfare you cut all the overhead and just pay everyone enough to exist, regardless of whether you actually need it. It'd still be more expensive, but giving people something dependable to fall back on would hopefully increase innovation and entrepreneurship, offsetting some of the costs
Okay so let’s divide the US federal budget by the number of people. So $21k per person. Now what happens to the guy who needs dialysis. It costs $60k. Right now the federal government pays. Now it’s given him a third the cost back. He just dies?
That’s a matter of where you get your taxes from. Plenty of corporations can afford to pay a more fair share. And studies on basic income have so far shown it to be effective.
> Plenty of corporations can afford to pay a more fair share
Can we stop pretending with the word "fair"? If you want to squeeze out more money then you do it by force. It's not "fair". It's just "we can do this".
Studies on basic income have shown that it's harmful to the people who receive it.
They report no improvements on any measured outcome. Not lower stress, not more education, not better health. They work a bit less but that doesn't help them or their kids.
Over the long term it harms them because their productive skills, values, and emotional capacities atrophy away from lack of use.
What’s the alternative, if AI does turn out to be able to replace large swathes of the workforce? Just kill everyone?
You could ban it and then turn all existing employment into a makework jobs program, but this doesn’t seem sustainable: work you know is pointless is just as psychically corrosive, and in any event companies will just leave for less-regulated shores where AI is allowed.
Yes, but not for the reasons you state. It harms them because we have an zero desire as a society to effectively combat inflation, which negates any benefits we can give people who receive the basic income.
The powers-that-be don't take action to make sure the people who get basic income can actually use it to improve their lives. Food prices rapidly inflate, education costs skyrocket, medical costs increase exponentially almost overnight.
Much like how the government backstopping student loans basically got university costs to jump, promising to give people a basic income while not addressing the root causes of inequality and wealth disparity just makes things worse.
If you want basic income to truly work, you have to engage in some activities in the short term that are inherently un-capitalistic, although if done correctly, actually improve capitalism as a whole for society. Price controls and freezes, slashing executive pay, increasing taxes on the wealthiest, etc.
Whats the alternative? Kill off all humans replaced by AI unable to do something else for a living?
Its sad enough that there are food stamps given the amount of food that regularly ends up in a dumpster on a daily basis.
Humans come first, not machinery.
Whats with the people already alive? If u continuously replace them with AI u need to support them in case of their inability to provide for themselves. Im afraid the worldwide available social security nets in place aren't made for withstanding this kind of unemployment.
Well considering that she had a bunch of secretaries doing typing for her as a bank manager then transitioned to a world where there were no typists anymore was a pretty explicit change from her perspective.
She never learned how to type on a keyboard so you do the math
Your grandma had plenty of opportunities in the post war eras. During her time there was always a need for human workers. While I dont think AI can actually replace anyone reliably, I still can see how executives buy into this promise and try it.
This is a unique situation humanity never was confronted with. Even the industrialization required a lot of human work. If all white collar jobs went away there is a huge imbalance in available workers vs available work. Simply adapting to this isn't a thing given that monopolies killed competition and its not feasible for your everyday Joe to break into markets anymore. Kudos to your grandma for making it this long, simply not a comparable situation however.
So you are the type of person that actively contributes to the world being as shit as it is. Good to know. Your disregard for the weak disgusts me. Have a good evening.
The people who own the magical AIs won't decide that they want to keep us all as pets, we won't have leverage to demand that they keep us all as pets, and they will have the resources to make sure they no longer need to keep us as pets. Shouting "You should keep humans as pets" is unlikely to change this fundamental equation.
I think you're basing AI only on modern 2025 LLMs.
If there is a magnitude increase in compute (TPUs, NPUs, etc) over the next 3-5 years then even marginal increases in LLM usability will take white collar jobs.
If there is an exponential increase in power (fusion) and compute (quantum) combined with improvements in robotics and you're in the territory where humans can entirely be replaced in all industries (blue collar, white collar, doctors, lawyers, etc).
We didn’t tax tractors, but we did tax the expanded economy tractors enabled, and built institutions to manage the transition.
Ex-farmhands had time to move into new jobs created by the Industrial Revolution, and it took decades. People also moved into knowledge work. What happens when AI takes all those jobs in far less time, with no other industries to offer employment?
If AI makes a few people trillionaires while hollowing out the middle class, how do we keep the lights on?
> If AI makes a few people trillionaires while hollowing out the middle class, how do we keep the lights on?
Tax the thing you care about? You don't need to care really about the definition of AI or what an AI is or anything like that, you care that some people got trillions.
Tax "making an absolute shitton of money" or "being worth an insane amount". Taxing AI specifically means you're absolutely fucked if Altman turns out to not earn that much but someone who makes a specific connector to data centres is the richest person in the world. Is Nvidia an AI company? What is AI? *Who cares?* The point is to figure out some way as a society of continuing.
There is a scene of wealth transfer agent simulations. With some dynamics you easily end up in a situation where after enough transactions, all of the wealth is concentrated on one single agent. Think about "I am the state" but extended to the whole world. Billionaires trying to affect countries' elections seems child's play compared to that.
> Tractors largely replaced human labour in farming about a hundred years ago
And what happened around that time? yeah it wasn't a period of smooth calmness was it? Periods of massive changes in productivity (ie lots of people going into unemployment) causes huge societal changes.
The thing that staved off revolution in the US was lots of spending, banking regulations, federal reserve, new deal and the like. Those that didn't do that, fell.
So its less about who pays tax, and more about who is going to give money to the unemployed?
If something transformative is just coming in and threatens the economic flows that sustains your social model, it is worth asking the question of how the economic flows should be proactively updated moving forward.
The tractor created the middle class by giving more people access to jobs that paid better and provided more free time. It is yet to be proven who will benefit from the advancement of LLMs, but there is some consensus in the article that the large companies operating these LLMs will be. From there, proposing taxes on that additional profit doesn't seem ridiculous.
If we tax at the state level like motor vehicles, what happens when AI living in a Texas datacenter replaces 1 million jobs in Florida? The people are in Florida, but the money goes to Texas.
Tractors replaced a task in specific fields, farming, construction largely. AI seems to have the potential to cover more territory. The potential blast radius is greater.
Agricultural jobs accounted for more than 80% of the preindustrial workforce. Granted you still needed people to maintain the jobs and some roles weren't entirely replaced or replaceable. I wonder how the two compare. I will say that AI has the opportunity to affect many lines of work which makes it scary for many.
80% was peak agriculture, but involvement was already in decline before the tractor. Necessarily so — nobody would have had time to create the tractor if they were still busy toiling in the field. The tractor was the final death knell, I suppose, but only around 40% of the workforce was involved in agriculture by the time the tractor started showing up on farms.
> AI seems to have the potential to cover more territory.
Theoretically, the only two things that any human go to earn money is (a) use muscles or (b) use brains.
I feel like AI plus robots covers all the territory. Maybe not quite yet - maybe we have a few more years, but what job could a human do that couldn't be done by an AI controlling a humanoid robot?
I'm not arguing for taxing AI (or tractors) -- but...if we made the wrong decision 100yrs ago, should we make the wrong decision again? It is worth debating.
The wrong decision wasn't using productivity enhancers - it was building a society around the idea that everyone MUST have a job, even in the presence of substantial productivity enhancers which massively decrease the number of jobs. We've scraped by so far... so far.
The problem is that for the vast majority of people to be psychologically healthy they must have a job. This isn't a societal decision, it's a reality about how humans are.
The alternative is like feeding an animal instead of letting it live the lifestyle it's adapted for. That helps it in the moment but over time its capacities atrophy and it ends up weakened, twisted and harmed with nothing to spend its natural instincts on.
> The problem is that for the vast majority of people to be psychologically healthy they must have a job. This isn't a societal decision, it's a reality about how humans are.
The "job" can be things like volunteering, artwork, finding a cause, inventing, raising children, teaching...
Work can be subsidized and based around personal interest and achieve the "psychologically healthy" aspect that you describe.
> If we get working AI, humans will be unemployable at inventing useful things.
The point you're responding to is that humans would be able to do it for personal fulfillment and thus preserve their mental health, not to be useful to someone else.
When they used to say that you'd make more money going to university, that is what they were talking about. The idea was that if you went into the research labs you'd develop capital to multiply human output, which is how you make more money. Most ended up confusing the messaging with "go to university to get a job — the same job you would have done anyway..." and incomes have held stagnant as a result. It was an interesting dream, though.
But not really what everyday normal people want. They like to have somewhere they can show up to and be told what to do, so to speak.
I would wager that more jobs accelerate psychological and physiological issues than, say, volunteering or unemployment with active community engagement do. At the very least, the psychological benefits of unemployment are objectively an incidental side-effect of its actual purpose, which is labor for a profitable enterprise. That is to say that employment is still "functional" if it generates that labor even while destroying someone's psychological health. If that health is paramount, the structure of employment probably needs to change in order to privilege health over productivity, even to productivity's detriment. Otherwise, the vast majority of people would be better off with some other institution.
They must have something interesting to do. It doesn't have to be a job.
The ideal society is one where humans only do things that they actually enjoy doing, whatever that is, and automation does the rest. Any human being forced to perform labor not because they want to, but because they need to do so to survive, should be considered a blight on the honor of our species.
>Pretty sure farmers don't buy them tax free? [...], but they still foot the rest of the tax burden.
To clarify, this isn't about the farmer paying a "sales tax" or VAT as % of the price of buying the tractor.
The article is talking about something else: paying additional machine taxes to cover the loss of unemployed crop workers that would have been paying individual income taxes.
Oh I get it, but I do find it silly, because that only means that the company running the models pay more in taxes for providing you with a service, which is weird to me. Especially if they keep costs down on goods and services, allowing us to focus on quality of output more. At least that's what Claude Code has done for my side projects.
These two waves of automation are fundamentally different and shouldn’t be compared.
We got lucky that when farming was being mechanized, it happened slowly and while manufacturing was still growing and could soak up the labor. When manufacturing was offshored/automated, we got less lucky and a lot of people faced a massive drop in quality of life as they lost their high paying jobs and couldn’t find equivalent ones in the service sector.
Now we’re seeing a potential massive job displacement, the force doing the displacing can likely also do many of the new jobs that may arise, and the change is happening faster than any ever before.
Capitalism doesn’t promise to create new jobs when old ones are automated, we’ve just gotten lucky in the past, and our luck has run out.
Tractors are taxed in Montana. We have a "business equipment tax" that works roughly like the tax on cars, but applies to assets that don't drive on the public highway such as tractors and other machinery. Republicans have waged a decades long campaign to reduce/abolish it though.
> when almost everyone was employed in agriculture
Employment was a product of the industrial revolution. In the age when most everyone worked in agriculture, they owned the farm operation.
We didn't tax the tractor to bail out failing small businesses then, and I strongly suspect there is no will to tax AI to bail out failing small businesses that might succumb to AI today either. The population generally doesn't like small businesses and is more than happy to see them fail.
It feels really alien to discuss this in terms of "taxing AI", like an economic abstraction completely breaking down. Ultimately when you take automation to its logical conclusion we have people with needs and we have machines and automation capable of meeting those needs with minimal human labor.
No matter how you try to resolve this economically, it should hold that if something can be produced with minimal human labor, it shouldn't require substantial human labor to buy (in "reasonable" quantities, however you want to define and enforce that).
Without understanding the "end game" of automation (decades+ from now) it feels like we're just sleepwalking into an absurd reality where a few trillionaires own the world's fully automated food supply chain, but buying food somehow requires just as much labor as it does today.
You're completely omitting externalised cost, though. As it stands, all this production requires gargantuan amounts of energy that have to come from somewhere, and cause pollution and waste that must be accounted for. As long as these factors aren't solved—if they can be solved in the first place—either the prices for consumers or the manufacturing cost must reflect this, I don't see the increased degree automation affecting prices much.
How does more pollution/waste equal higher consumer cost? Do you mean because we'll have to pay more taxes because we'll need more publicly funded resources to clean up the excess waste? Or because corporations would pass the price of the fines for violating environmental regulations onto consumers?
It doesn't matter much how exactly those costs are passed on; someone has to eventually pay for them. That includes the energy itself, which doesn't come for free, but also the bill for environmental damage and resource exhaustion that we will have to pay at some point. You can argue that that'll be the case only in the far future, but then you're just externalising the cost—again—to future generations. It's all moot: Someone will pay for it eventually.
That has nothing to do with this, those are things that should still be solved at a much higher level of abstraction. Tax the energy, pollution, waste - those have problems regardless of what caused them.
The point I am making is that the reason artefacts of highly automated production (even with minimal human labor required) will never become accessible for very low human labor, because all that automation has its own cost. We can externalise that as long as possible and defer the bill to somewhere or someone else, but it will have to be paid eventually.
> […] those are things that should still be solved at a much higher level of abstraction […]
I don't think that makes much sense. If a data center consumes all available electricity in a given municipality, it may provide AI services at a very low cost, but thereby makes the region uninhabitable. There is no way to "solve" this at a higher abstraction level. Or alternatively, consider a factory producing consumer goods, which emits toxic fumes; we can limit the amount of fumes the vicinity of the factory is exposed to by implementing very expensive filters—thus increasing the final price of the goods—or externalise all the negative effects—such as health risks in the population, ecological demise, and subsequently lower property values—to society, achieving a lower final price.
Currently, we often pick the latter option, because it usually has the better profit margin. I agree that it's a systemic issue that must be addressed holistically, but the actual solutions have to be implemented at all levels of the production chain. And this means the cost attached will have to be included in the price of all goods.
> The point I am making is that the reason artefacts of highly automated production (even with minimal human labor required) will never become accessible for very low human labor, because all that automation has its own cost
While I'm not sure I agree, this is not solved by tackling things at a low level and should be done at a higher level of abstraction - that's what they were saying.
> don't think that makes much sense. If a data center consumes all available electricity in a given municipality, it may provide AI services at a very low cost, but thereby makes the region uninhabitable.
If the data center was providing streaming services would you want to manage that differently? Imagine you had a data center that solved some user problem X, and another one that solves the same problem. Data center A uses AI, B does not but uses more power. Would you want to tax B less? Given what you've said so far I'd assume the answer is no - you'd want to tax that more because it's not really the AI part you care about, it's the power usage/emissions/local impact/externality X you want to avoid.
> I agree that it's a systemic issue that must be addressed holistically, but the actual solutions have to be implemented at all levels of the production chain.
Actually the more abstract sometimes the fewer places you have to deal with it. You don't have to figure out what cars everyone has, the specific MPG of each, driving patterns, how far your delivery driver went, whether they had other packages, etc - you can tax gasoline. This automatically flows through and avoids lots of wrangling about details and loopholes.
> Currently, we often pick the latter option, because it usually has the better profit margin.
Yes - and this drive makes it hard to manage when you put very precise rules around it. Tax AI and watch things rebrand as whatever falls just outside the limits of AI. See how products are built, deconstructed and remade exactly based on specific tariffs. Ford used to ship vans with windows and seats installed, then take them out again after they arrived!
I see a natural equilibrium with a tension: automation (also through AI) causes unit economics to drop and results in cheaper prices. At the same time, salaries for contributors grow because their impact is so high. So you end up with a new equilibrium of much cheaper prices and much higher salaries. What, however, about the people who can’t contribute? IMO the most natural and fair approach is to support (through whatever means) people’s “education”, allowing them to upgrade their skills so that they can contribute. IMO this leads to a new tension: not rich vs poor, or useful vs useless, but people who can up-level their skills vs those who don’t. And I think, at its extreme, it boils down to this: how much plasticity does your brain have? Because every other constraint, society can adapt or accommodate for.
That is a game thoery approach but it completely fails in the face of reality.
The reality is that the floor to become "useful" is relatively low, which means the few billioanires have a large pool of potentially useful people of which they only employ some, leading to no greater salaries due to labour competition.
The other potentially useful workers cannot pool together and compete as the barrier of entry in the sector is prohibitely high.
So a natural moat emerges over cost of setting up a company, workers beg for a job of which they will take for a small wage and a few billioanires control the market.
This is a much closer approximation to the market we currently see
Yeah, that definitely won't work at scale. The bar for what constitutes being "educated" keeps increasing. Previously it was knowing how to code, now it is having an ML PhD, for example. At the same time, AI keeps getting more and more capable, so no matter how much "education" you have, AI will eventually get to you.
In any case, the argument won't work for majority of the population without a college degree. Are you going to have 50+ year old truck drivers upskilling in a fancy new tool to keep a job? And again, how long until that new skill you upgraded them to is now done by AI as well.
There has been extensive debate around that topic since that paper came out. Some points to discuss:
1. Even the article you shared mentions that starting in 2003, earnings has stopped tracking productivity. "Total compensation remains close until 2003, but does not follow 2003’s uptick in productivity growth (behavior which remains a topic for future research)."
2. They use average earnings and not median earnings. Average earnings include people like CEOs. This by consequence shows that inequality among workers has also increased. Check out chart 4 here to see how much smaller median wages are compared to average: (https://www.csls.ca/ipm/23/IPM-23-Mishel-Gee.pdf)
3. Apart from the average vs median difference, the biggest point of contention between that study and more recent ones is the measure of inflation used. The 2007 study you cite uses a measure of inflation that also includes things paid by employers like medical insurance. It turns out that using that one leads to significantly lower inflation. If you use consumer price index, what workers actually pay out of pocket, the difference again becomes larger. Citing page 37 of the study above: "In other words, that the prices of consumer items has risen faster than a broader index of prices that includes net exports, government goods and services, and investment goods. Therefore, for a given increase in income, the purchasing power of the consumer has fallen faster than that of business for investment goods and foreigners for U.S. exports."
The article I shared before plus this other one describe all the discrepancies (https://www.epi.org/productivity-pay-gap/). Specially see chart 10 in the PDF study. That shows all possible variations of how you measure productivity and income. No matter how you look at it, the most substantiated conclusion is that income has NOT matched productivity.
I think the idea is that the trillionaires won't need us at all when the food supply is fully automated. They might keep a small population for genetic diversity, but that's about it.
Transition periods are always difficult, but they've always reached some equilibrium. Right now the spread between the two seem higher (not sure they are) but the system will bring them closer together.
The real problem is that this question starts from what I think is a stupid premise.
If a startup that never had employees uses AI, should be it be taxed differently to a startup that never had employees that doesn't use AI? If so, what is the justification for that? It seems to me it can only be some hypothetical idea that humans might have been able to do some of the work at that company, even if they never have employed people to do that work.
Should a company be taxed more when it reduces employee count for any reason that doesn't involve AI? I'd say not, because otherwise you're forcing companies that are strapped for cash into near or actual bankruptcy instead of being able to downsize.
If a company should be taxed more for reducing employee count while also using AI, but not if they don't, wouldn't you just expect companies to outsource the AI component of the work to other companies?
It seems to me that the crux of this article is trying to find a justification to tax companies working in the AI space more without clearly articulating why.
Yes, the industries of today are going through a seismic shift, similar to the sewing revolution when sewers were losing jobs to machines, or when farm workers tilling the land by hand were replaced by machines, secretaries no longer being required as managers got computers and found it easier just to send an email themselves, etc.
In the near future, just as before, people whose skills are no longer required by industry will have to adapt to survive. But taxing industry just because it's becoming more efficient just has the effect of making that industry less competitive globally.
The same place they've always gone: to consumers purchasing the products made by those automated processes.
The average person now is far wealthier in terms of actual purchasing power than the average person 100 years ago, and that's largely because of automation making everything cheaper.
> The average person now is far wealthier in terms of actual purchasing power than the average person 100 years ago
access to housing is incredibly expensive. Measuring their purchasing power for how many scented candles they can buy is pretty meaningless when they are much closer to homelessness than ever before.
Land is one thing you can't automate the production of, and construction still consists mostly of manual skilled labor. But I think despite that you'll find housing today still compares very favorably to housing 100 years ago (in terms of median square footage, safety, amenities, etc).
> The same place they've always gone: to consumers purchasing the products made by those automated processes.
The people who are "automated away" and have reduced income are also less of a consumer. In a society where most jobs are automated, who are the consumers?
You've spent your whole life living in a society where that's already happened. 1000 years ago nearly everyone was employed in agriculture. Now nearly all those jobs are automated.
So you tell me: where are the consumers? Why aren't we all unemployed and unable to afford to buy anything now that those agriculture jobs have been automated away? Or did we find other productive activities to spend our time on?
I'm open to the idea that companies need much larger barriers to functioning internationally. Not just because of their ability to pump money overseas, but also because they are often used to blatantly further the security goals of their parent countries (looking at you two USA and China, but everyone able to, seems to do it).
Maybe the current system would've worked if it was built on many more small companies. These monolithic corporations funneling power upward are the death of civilization, and leadership are clearly high on their own farts. Or just want to be on top in a new feudal age.
It's dangerous but not pointless. If we get human mass unemployment, someone has to pay for them, and if the companies offering the AI sit in the US, most countries won't be able tax OpenAI & Co directly.
1. Financial perspective. People are too focused on what "the best" is, rather than what is the most financially viable at scale, which is what really matters. At the peak of the Ethereum mining craze in 2016/2017 the GTX Titan X was the best performing GPU. But buying 200$ AMD Polaris GPUs was what gave you the most performance per $ and per watt.
2. Open source models keep being impressive and lagging only so much behind the closed source ones. It's hard to predict the future, but few years from now the most viable application might be to internally fine tune and deploy on whatever cloud or internal infra open source models. I have already many use cases in prod where Gemini Flash 2.0 did a great job, and that's an old model by today's standards (summarizing news/translation). Now I have in production a service that reviews pull requests and updates documentation/JIRA accordingly when they are merged. That requires quite more plumbing, agentic approach and thinking, but yet again open source models can do a terrific job already there.
3. At the end of the day, the lion share is going to be eaten by whoever provides the best applications, not models, but conversely we're also living in a space where more and more you can just build roughly-the-same-feature with few $ worth of APIs.
4. Even more, the biggest benefit will lie among those who will leverage AI in the best way. Companies and individuals able to really delegate successfully complex tasks making crazy savings. Who knows who's really gonna take the biggest advantage. Maybe US companies, maybe not.
Thus, in essence, I envy your certainties around the future, I personally have lots and lots of doubts and have no clue who's gonna eat whoever's lunch.
> 1. Financial perspective. People are too focused on what "the best" is, rather than what is the most financially viable at scale, which is what really matters.
I don't think so: People flocked to ChatGPT because it was the best, even though there are far cheaper options. If you are 10% better than any competitor, you don't get just 10% more market share, you get far more. It's a winner-takes-most situation.
Highly automated and connected business infrastructure will make replacing first world jobs the easiest, but yes as automation spreads, the spigot of job replacement will flow to every corner of the globe.
That's not the problem. The problem is that the revenue will flow to the US, and when those US companies are taxed, this will at most pay for an UBI for US Americans only. Which will mean the US gets very rich while the other countries get very poor, because there is no large AI company to tax.
Looking at the actual article, the people suggesting taxes on AI are American Nobel laureate Edmund Phelps, and Bill Gates, founder of MSFT. The Europeans suggest more general taxes on capital instead.
Taxing wealth is much harder on a practical and algorithmic level than taxing income.
But either way, taxing the tool is micromanaging the problem, and some powerful people cynically promote that because they can aim the details away from themselves.
Switzerland taxes wealth instead of capital gains (except for professional investors).
In some ways taxing wealth is quite simple, because wealth is already meticulously recorded via contracts and owners go out of their way to estimate the magnitude of their wealth for example to borrow money or for other financial and economic obligations.
Another approach would be to tax capital gains at the same rate as income and introduce additional top brackets. I have a hard time to find a good faith reason for capital gains to be taxed less than labor.
But there are enough other ways where it's really hard and unsolved. Imagine someone bought an $X irreplaceable ancient urn to hold the ashes of their parents.
How do you calculate the $Y "wealth" inside that non-fungible urn on their mantelpiece today? How can one determine which "I would buy that for X" statements are falsely low or falsely high?
> owners go out of their way to estimate the magnitude of their wealth for example to borrow money
I have no inherent problem linking one voluntary claim of wealth to another conclusion of wealth... But what happens when someone wealthy who doesn't actually need any loans applies for them while presenting themselves as a pauper?
Or cases where someone seeks a loan and their rationale is "I may have negative net worth but you'll be made whole because you're first in line", as opposed to "I have high net worth"?
> I have a hard time to find a good faith reason for capital gains to be taxed less than labor.
Consider a small company of AcmeCo with 1-10 workers all dedicated to the art of Acme'ing, each taking tiny wages (but accepting shares) because they believe in the mission and want to launch the company.
On a technical level, anything they (might) get would be capital gains, but clearly it's not the same as passive rents with no labor behind it. It's closer to deferred wages.
Capital gains are risky to generate. Many investments completely fail and when that happens, investors get very little tax relief.
If you increase capital gains tax, the more risky ideas will no longer be viable investment vehicles even though some of them would have been successful. Across the entire economy, the net effect will be less innovation, stagnation, and loss of power relative to foreign countries.
Tax rates are carefully tuned to maximize tax revenue without unduly disincentivizing production. To change them purely based on vibes would be catastrophically stupid.
> Many investments completely fail and when that happens, investors get very little tax relief
I don't really believe it. Investment is always incentivized by tax breaks and other political gifts. But once things turn bad it's the citizen's turn to pay for it. Fire all staff? We pay for unemployment. Pollute the soil? We pay for cleanup. Empty the water table? Guess who's gonna depend on the state for clean water...
> To change them purely based on vibes would be catastrophically stupid.
Please tell that to every neo liberal in my country. Reducing taxes on the rich seems to be their passtime, while every time some kind of capital gain is mentioned, everyone and their dogs become experts in economics and can tell you it's folly.
> Taxing wealth is much harder on a practical and algorithmic level than taxing income.
I find this argument somewhat unconvincing.
Where is most of the wealth? In hard assets, such as real estate and financial assets, such as stocks and bonds. The former are very difficult to hide, for obvious reasons. As for the latter, the ownership of every single share is recorded in large databases (e.g. DTCC, Clearstream and Euroclear). In that sense, the "physical location" of most of the wealth is well known, so in theory it should really not be difficult to tax it.
The unit of account for tax is the currency of the relevant sovereign. Most contracts for income are denominated in that unit of account, even if it is not there is often a highly liquid market (FX) between units of account.
Most wealth is not stored in assets where the unit of account is that of the sovereign. This counts double for assets with a physical location.
This isn't something that can be easily hand-waived away.
My understanding is that you say that taxing things denominated in a foreign currency is difficult? But why? I already pay taxes on my capital gains denominated in a foreign currency (for example dollars). There are official government exchange rates for tax reasons, published daily. I don't see anything to hand wave here, because there's no problem.
Not parent-poster, but I imagine the most difficult cases involve non-public stocks or non-fungible physical assets. Consider the problem of: "Someone purchased an irreplaceable ancient urn for $1m and put their parents ashes in it, what's that in taxable wealth today?"
It's too easy for people to offer hypothetical prices they'll never have to execute on. You could establish a price by forcing people to sell anything to the highest bidder, but that kinda explodes any conventional idea of property, and now the government is spending all its time running a trillion sketchy auctions while no human has time to do productive work anymore because your neighbor is trying to buy your car for $1 and you need to arrange a more-plausible offer before you lose it.
Apologies, in an attempt to be precise I have used convoluted language.
The point I'm trying to make is that assets such as land are not denominated in any currency and typically end up being held for such large amounts of time with such substantial transaction costs that's there would be a large cost involved in knowing what the value of the thing being taxed is.
If I pay you $100k, £100k or ¥100k we can use spot rates to work out how many € that is within much less than 1%.
If I own a piece of land how would you answer the question, "what should the value for taxation be?"
If you go with the last transaction price then this will have a substantial impact on properties that haven't been sold for a long time and encourage people to enter into transactions that look like sales but aren't (such a 999-year lease).
Leave it up to a government agency to decide and this agency will come under huge pressure to favour one type of activity over another. How do you value land owned by the government? What if that land is privatised? The UK's attempts to deal with this when it privatised BT completely destroyed the fibre to the premises industry in the UK for years.
Financial assets are extremely easy to hide. Set up an international chain of shell companies, foundations, and trusts, install a fake beneficial owner or trustee or two at various points, carve out deductibles for IP and "services", and the ownership becomes completely opaque.
And that's just the legal version.
I know someone who used to work as a business lawyer. She spent years trying to track down the true owners in various cases. At the very least it's an expensive business. And sometimes it just couldn't be done.
Of course governments can cut the knot with physical assets, walk into a building with troops and/or police, and say "This is ours now." Or they can order banks to hand over the money in accounts.
But before they can do that, there has to be some certainty about the owner. And even getting part way there can take a while and cost a lot.
A flat tax on wealth would be extremely easy to enforce. Basically if the bill for an asset doesn't get paid it goes to the government, and the bill is trivial to calculate because it doesn't need the rest of the entity.
If you apply automatic tax on bonds people will just not buy them unless you also increase their returns. It's a pointless exercise.
Same goes for stocks, it's just a bit bigger circle in this case.
Capital gain tax is just a bad tax that distorts decisions and make things less efficient for no reason. It's much better to tax resources (mainly land but also infrastructure usage) and charge for enforcement of IP/patents.
But financial assets do not need physical space, so they can be tied to smaller countries which will be very happy to tax them at a lower rate so they can "steal them" from the original country where they were generated.
You can take your financial assets with you but they're ultimately worthless, they're just a construct that represents something which has real value, like shares of a company: its real estate, inventory, employees, institutional knowledge, and future productive output have real value, your piece of paper doesn't.
Distribution of wealth is about the distribution of real resources, especially control over human labor. And that underlying thing can always be taxed, optimized, or even repurposed to better serve the needs of society.
You can still tax based on the persons residence or citizenship. In the end someone can be attributed to wealth, and if they want to stay where they are physically, they should also tax like it.
> Taxing wealth is much harder on a practical and algorithmic level than taxing income.
Depends on the tax. It is a lot easier to move move profits to a low tax jurisdiction than it is to move land or machinery.
> But either way, taxing the tool is micromanaging the problem, and some powerful people cynically promote that because they can aim the details away from themselves.
I definitely agree with that.
There are all sorts of problems. Do you tax this notional "income" where the work is done or where the AI runs or where the company that owns it is incorporated?
I need to think about this more, but the first thing that comes to my mind is not that this looks like “taxing the tool”, but that this can (ought to?) be similar to an alcohol or a fuel duty.
Nobody calls alcohol duty “micromanagement”.
For products like petrol, it’s widely known that from money paid for a liter when it’s sold, say, in the UK, more money stays in the UK’s government pocket via a complex web of taxes and duties, than profits the oil production company that supplied crude oil for that petrol.
Maybe taxing a kWh of the AI data center energy consumption should be a thing? I don’t know.
They don't, but it really is! There's different rates for different specific gravity and different processes.
Re: petrol, I note that the UK government is trying to replace this as part of the EV transition with a milage tax, which is proving controversial and fiddly.
Energy tax is a hugely fraught political issue. The "poster child" for cheap energy is a little old lady huddled over a 1kW one bar electric heater. Energy bills are a big "fixed" cost for households. Many small businesses have been affected by energy price rises - e.g. restaurants. And yet at the other end AI represents such a huge deployment of capital expenditure that it's distorting prices for everything else - energy, RAM, and so on.
I think I'd favor a "personal allowance" model similar to income tax, where you get the first X units of energy tax free and then have to pay VAT, carbon taxes etc. on the rest of it.
> I think I'd favor a "personal allowance" model similar to income tax, where you get the first X units of energy tax free and then have to pay VAT, carbon taxes etc. on the rest of it.
I can see why this is tempting, but I think there's a better way to legislate with this, especially with that poster child.
I'm a landlord of a flat. I used to live in it before I left the UK. The EPC rating is D, so despite the double glazing it's still pretty cold in winter. I am now living in a fancy new-build in Berlin which, despite being 3 times the size of that flat, can be kept warm for 10 months of the year just by body heat and waste energy from the white goods — even with higher electricity costs in Germany, it costs less to be comfortable in this building in a T-shirt all year round (even while snow is falling outside), than to be wearing fleeces and sleeping with hot water bottles and still not be completely comfortable in that flat in the UK.
A few years back there was a proposal for legislation that would increase the requirements for all rental property to be at minimum C-rated by 2030, as I understand it this was dropped and the current minimum is F or something ridiculous like that. My agent's advice is to not do anything until the legislation is actually sorted, even though I'm happy to spend whatever to upgrade the place, because until you know what the legislation demands there's always a risk of doing the wrong work beforehand, having to rip it out and put something else in.
IMO, government should push for this kind of boost, as it has with other energy-saving and insulation-boosting measures.
My first rental after graduation was a Welsh solid stone wall construction; like the example you gave, I couldn't keep warm there even with the electric bar heater a meter from me.
The current minimum EPC rating is D. The legislation to raise it to C hasn't been dropped, they just haven't decided exactly what date it will take place. And it's stupid legislation because many old properties cannot be sensibly raised from D to C, and these are the properties (e.g. terraced housing) which are typically rented out. So, we have a housing crisis with too few properties available to rent and the legislation will force landlords to take rental property off the market. Madness.
There's a lot of not-joined-up thinking in the UK government. Has been for ages.
Like, the housing crisis in the UK, there's a lot of empty houses, they're just in places with no jobs, could encourage employers to go there, but HS2 mumble mumble. Could build more houses, but greenbelt, and existing homeowners like the house prices going up, and lots of builders were Polish and oh look Brexit.
Right now, winter fuel allowance is literally burning money because the houses are not good enough. This is also not sensible.
I remember there was a pressure group "insulate britain". Their aggressive tactics got them banned and arrested, and the idea was never heard from again. I sometimes wonder if that wasn't the intended outcome, a low-temperature conspiracy theory.
Thinking about who might benefit from it being a conspiracy, the only finger I can point at would be Russia? (Well, unless it's a long-term generational anger at the British Empire, which I have discovered is more of a thing than most Brits realise).
The issue I have with your proposal is that it discloses too much metadata to tax authorities in order to enforce compliance. They'll have an almost perfect map of the legal compute in their jurisdiction. Access to compute should be free to all and not gated by taxes.
Tax on electricity is already a thing. That can be adjusted and even be made progressive. Extra for fossils and so on.
That would be a highly bureaucratic solution with significant overheads.
Would everyone pay extra tax per kWh or just AI computers? Tax it on the producer or consumer side?
How would you verify that a particular data center is "bad computation" and needs a different tax rate on its energy usage.
Should an AI data center from pharmaceuticals or biotech startup be taxed extra per kWh, even if the AI is purely used for medical research?
Just big AI datacenters. If this encourages people to run local AI, all the better.
> Should an AI data center from pharmaceuticals or biotech startup be taxed extra per kWh, even if the AI is purely used for medical research?
That's not a gotcha.. those are all policy choices. My personal preference is, yes, of course - medical research today is taxed just fine. If there's lobbying to specifically grant tax benefits to medical research, I can see an exception being carved.
You think multiple localised heat centres are more efficient than centralised managed heat centres. Why don't we all just have a coal-fired power station in our back garden?
I think the simplest explanation is also the best one. Like you said, it is very difficult to tax wealth.
I think we have no option other than taxing loans and other money movements like that in sufficiently large scale as ordinary income. If I get a loan for USD 200k for a house once a year, I think it isn't income but if ElMo gets loans worth USD 20M a year, every year, he should pay income tax on all of that as if it was ordinary income. How he pays it? I don't care. Sell some assets. Oh and that sale is also taxable.
The problem is that rich people and large companies usually go to great lengths to avoid taxes, use loopholes or get special deals (and with great success). The missing tax income has to come from the middle class, who can't avoid it.
With increased automation, this only gets more extreme.
Surely if we can recognize this, an AI worthy of the name would be able to recognize this at scale, and what can be recognized can be remediated…
Or perhaps this could serve as a kind of test: a technology that cannot be reliably used in tax evasion enforcement simply isn’t worthy of the name AI.
Or perhaps it reveals that we have structural problems, and certain concentrations of wealth with or without automation are a threat to the just and effective operation of society and should therefore be as vigorously opposed as crime or foreign attacks.
> The missing tax income has to come from the middle class, who can't avoid it.
Taxes on labor are actually a method of extracting money form the rich capital owners.
As you mentioned it's easy for the rich people to hide their wealth and avoid taxes on its growth.
The one thing that was very hard for them to avoid or hide was purchasing labor which they had to do to enlarge their wealth. So governments taxed that.
If governments lowered the taxes on labor it wouldn't mean middle class would earn more. It would only result in capital owners paying less for work. They always pay as little as possible and how little a person is willing to work for is the same, tax or no tax. Because money in hand is what counts.
Of course since as labor is being replaced with automation this way of collecting tax on capital growth becomes less and less feasible, so things are bound to change.
Directly taxing AI is very hard. Imagine if a company had to pay taxes for every AI agent operating in the U.S. or the E.U. As if they were regular employees. Big corporations would simply move the AI agents to countries without taxes.
It's actually trivial. AI apis are pretty streamlined by now. Just slap a tax on processed tokens and you're guaranteed to reach every AI agent out there. It already happens everywhere with sales tax for normal products. Just treat tokens as the product and create an extra tax for it.
Let's say EU and US taxes AI tokens. India doesn't, so almost all prompting done by international companies now is outsourced to India, and still not taxed.
Or do you tax AI companies and tax tokens "at source"? Then, obviously, they either lose competition with foreign (let's say Chinese) companies that do the same but are not taxed, or more likely all AI companies move out of EU and US.
Audits? Like it happens with licensed software. The issue is that if any country won't play ball with either not adding the taxes or by closing an eye, everyone is gonna put their datacentes there and become un-auditable.
I guess the other countries can slap sanctions on them, but the people benefitting won't care really.
You could tax the energy and subsidize it for individuals. It's the ultimate resource that all business uses. But that would mean unscrupulous countries could tax their energy less and attract AI farms. So probably you need to tax imported tokens (and other goods) as well. There could be many benefits of taxing grid energy instead of labor.
This is how sales tax already works. If you sell something to another country that has sales tax, you need to pay it irrespective of where you produced it.
Not only that, do you tax AI that doesn’t replace humans? How can you tell? Do you tax differently depending on how many workers it replaces? How do you measure that? Do you create exemptions for non-profit or humanitarian use? How do you measure that?
I can only image the Kafkaesque tax code the government would come up with. Then it would create all sorts of weird incentives as companies attempt to minimize tax paid.
Well for starters, robots shouldn’t be tax deductible because you get a net deduction already from not paying wages, so you should pay maximum tax on their purchase price.
(Otherwise you would buy a robot.. tax deduct it, then pay less tax by not paying wages, which basically means humans would be paying tax to offset the cost of corporates buying robot to replace their own jobs which doesn’t seem fair)
Plus, they should probably add a 50% VAT or something like that on initial purchase, which covers displaced tax for at least 1-2 years and can help cover any initial teething issues or increases in social services.
I personally don’t think I can deal with living in a society where robots are so cheap that within 5 years or whatever there’s 2-3 times the human population worth of robots. Tax it all to hell, because that sounds maddening.
You know in an ideal world, maybe these robots don’t last that long, but they still end up slightly cheaper than workforce, so we just tax the hell out of them and give all the money back to the people as UBI and that’s how we achieve the UBI utopia.
Or maybe we treat them like motor cars and make people register them on an annual basis if they’re going to use them commercially… like $30k/year or something.
Exactly. This is such a silly argument. The article takes the argument "if a lot of jobs disappeared since they are now done effectively for free, what about tax revenue??"
It really misses the forrest from the trees. You're transported into a world in which efficiencies mean that much fewer people need to work, but somehow government services and entitlements are unchanged and we need to hit roughly the same percent federal tax receipts or ... what exactly?
Or...infrastructure, public services and schools go unmaintained? How about the magic technology supposedly allowing for all of this efficency, all the while it imagines a human has six fingers, who will maintain that?
Also, if magical robot AI makes private operations more efficient, requiring less cost for the same or more amount, then it can do the same thing for government operations.
So, even more people out on the streets desperately trying to get their slice of survival by being sexually available to the equity lords? Because what else will there be?
> You're transported into a world in which efficiencies mean that much fewer people need to work,
It's a matter of perspective. I'm pretty sure that from their perspective those people very much need to work because they need to pay taxes, rent, insurance, food etc...
What mechanism is going to ensure that the increased productivity is going to result in lower cost of living for these people such that they no longer require to spend so much of their life working to survive?
> I'm pretty sure that from their perspective those people very much need to work because they need to pay taxes, rent, insurance, food etc...
That's a pretty Matrix "human-battery" level attitude to your fellow brothers and sisters. "They need to work to pay taxes, rent, and insurance". Ie, they only exist and are allowed to live to be serfs - or cattle really.
Yeah absolutely, and they shouldn't be taxed extra specifically for using a new technology. If people need a UBI they should be paid it off the back of all taxes (which should rise if automation is successful), not a specific automation tax. Saving jobs sounds good and it's an easy win but you end up with a stagnant economy where people are paid sinecures to do make-work, which is doubly harmful since the company has to pay extra for the employee, who is also deprived of being able to do some other job that would be useful to the economy.
They already have, significantly, around 25-35% in developed economies. The issue is that people often look at revenue, seeing company X earning $100 billion annually, and assume they should pay $20 billion in taxes. However, most AI companies today are not profitable and spend up to 100% more than their revenue on R&D and product development. I doubt they will turn a profit anytime soon, probably not for at least a decade.
> They already have, significantly, around 25-35% in developed economies
The thing is companies and even self-employed individuals of a certain wealth level know how to "(ab)use" it. From illegal but trivial and hard to detect tax evasion to financing personal lifestyle by having the company pay for certain luxuries (cars, computers, furniture, etc.).
If you have the wealth to have a dedicated office that dedicated office can be your man cave if you justify it with having all sorts of amenities for customers. And good luck to whoever checks taxes to find out how exactly things are used/not used.
All of that usually means that companies, company owners and high ranking managers get away with not paying taxes for a lot of things that everyone else does simply because they don't have a say within these companies.
And all of that is before you go to the tax advisor.
I am sorry, but if you do hard honest work the chances of you getting rich are beyond slim. Even worse when you do something that actually benefits society.
You tax where you can not where you should. Corporations trivially hide profits. What they couldn't hide well was labor. You know what else they can't hide? Their power bill. It even works for companies that eternally operate "at loss" (which also parallels taxing labor).
I'm not so sure this argument is valid. The invention of the wheel barrow created new jobs in wheel barrow manufacturing and distribution. On the other hand, the promise/threat of AI seems to be the complete displacement of humans in many industries without creating alternative employment for the vast majority.
It does lead to people loosing their job. If you have a pile of dirt that needs 3 people to move it with buckets but now 1 person can move the same pile with a wheelbarrow then the 2 others are out of a job.
Same as when one developer with AI can do the job of 3 developers and the other 2 are fired.
do you have stats on moving of dirt with buckets vs. moving with wheelbarrows? Or is this just an assumption you are making? I think probably an assumption because how often do people move piles of dirt without wheelbarrows nowadays so where would you actually have your data from?
In my anecdotal experience moving piles of dirt manually (for large piles of dirt) it is generally the digging up of the dirt that takes the most effort, if I had to move it with buckets or a wheelbarrow I would still expect that to be the case.
I would furthermore expect that there are some functions at work in modelling the moving of large piles of dirt using manual labor.
Your model may make sense with a small pile of dirt but I don't think you will find 1 remains and 2 go, at best 1 goes and you take a bit longer to move the pile.
Also, this is just my observations of having had large piles of dirt to move with manual labor (including wheelbarrows and several of those) As you scale up the amount of people you could drop by adding wheelbarrows goes down, because again the main problem is the digging. The wheelbarrows becomes a thing you trade off diggers on running. You will want to have more wheelbarrows that wheelbarrow users so that diggers can fill wheelbarrows while the users are running the already filled wheelbarrows to where the dirt is being dumped.
At this point then you would probably want to drop the wheelbarrow analogy and go to a backhoe and a truck, but then all of the various observations of the other flaws in the wheelbarrow argument become apparent, such as the factories to build backhoes and trucks, the training for backhoe operator etc. All leading to a relatively strong argument that existence of backhoes and trucks are a boost to the environment, potential job creator and those jobs will be more skilled jobs leading to higher wages in the economy.
It increases the value for that one person who uses the wheelbarrow sure, but it does not raise the value of labour in aggregate. The same would be true of AI tools.
I did not argue the tools lowered the value of labour in aggregate - I merely said that they did not increase it. However, the effect on the individual and the group are different. If you have 10 people carrying boulders across the field, and you introduce a wheelbarrow, and now you have one person carrying the same amount of boulders across the field, the total aggregate value of labour has stayed the same. This particular person can certainly capture more of that aggregate value than they could have before, but the total value has not gone up. It’s also true that now you have lowered the cost of moving boulders across the field, so yes, there could be more demand for whatever it is you’re selling and that could mean that maybe you need two or three workers with wheelbarrows. but I think if you’re going to talk about the value of aggregate labor, you have to control for the amount of demand.
Wheelbarrows are pretty simple devices, I’m sure many people just made them on their own. But even accepting this point, there’s no particular reason why we should expect that every invention until now generated new and different types of work, just not this one. The people talking about complete displacement are selling you a story because it gets them clicks and sells books.
A little known economic fact – the wheel was actually invented billions of years ago by bacteria and reinvented by every species since. It’s just that they all held off using it until they could be sure that it would create jobs. Thankfully thousands of years ago, human economists finally did the math and let everyone know that it checked out!
The problem is that thousands of sub-stackers, journalists, and "thought leaders" have realized they can make a living writing a weekly think piece speculating that AI will take jobs.
A lot of them are bullshit jobs though. We've yet to see "AI" do anything actually beneficial. I don't mean the stuff that was done before the AI hype like categorizing bacteria, etc.
Watch the news. One crisis after another, so maybe that freed up work force and the wealth generated by "AI" should be used to tackle at least one of them.
Huge amounts of taxes and dedication of that money could be a first step.
Alternatively don't raise taxes and use the oh so great AI to tackle these issues. Should be trivial if you have ">90%" of all work freed up.
The folks agitating for “social revolt” are not people at risk of losing their jobs, rather it’s the same people who’ve been agitating for social revolt for decades - people wealthy enough to spend years in university reading critical theory whose financial security was never at risk, whether from wheelbarrows or robots.
To some degree we already do. Corporations pay taxes.
We, as a society, allow corporations to pull resources from the commons because the other side of it is that their existence provides a value through jobs and tax revenue and such.
If the equation shifts such that the benefits dry up, but the downsides only increase, why should we allow that?
The solution could be as simple as higher business taxes or as wild as universal basic income.
It could be something like all AI is forced to be open source, open weight, free at least as far as the knowledge parts.
There's certainly no God given right to exclusively benefit from an invention. We allow that for as long as we care to.
And there's nothing illogical about changing these decisions as factors change.
Indeed, there’s nothing illogical about adjusting tax rates and structures as things change.
I am deeply sceptical of the idea that 99% of us are suddenly going to be idle any day now, so I think endless think pieces on what we should do when that day arrives are kind of pointless. But it is certainly obvious that if it did happen, we would have to reassess how we do stuff.
This is utterly backwards and your false statement leads to a completely wrong set of inferences.
We don't let corporations do anything because they provide value through jobs and taxes. What company do you know that exists (beyond transiently) solely by paying taxes and employing people?
Companies are an extension of the individual, they exist to make money for the individuals that own them so that those individuals can acquire goods and services that they themselves need or desire.
How do companies make this money? Holding people at gun point and taking it is generally illegal; instead they resort to providing goods or services to some set of people who are willing to pay for them.
To provide these goods or services they need to employ people. The fewer people companies in aggregate can employ, the better for people in aggregate since those people can acquire "things" (food, jewellery, phones,...) for less of their own labour (or equivalent dollars).
If the "benefits dry up" as you say, people will stop sending their hard earned money to this company and the company will eventually cease to exist. Your fallacy was assuming the benefits were the jobs and taxes, not the goods and services provided.
Corporations don’t provide goods or services: people inside them do. Corporations are a legal structure we allow to exist because it enables jobs and taxes.
Corporations don’t have to exist; they are a creation of society and thus can - and I think obviously- should be changed
Not even remotely true; corporations as we would recognise them today pre-date the legal system as we would recognise it today (and have existed in just about every legal system since).
Certain configurations of the corporation are described in our laws, e.g. "limited liability".
Have you ever done anything together with a group of other people? That is a company. That's why they are called companies. They are a group of people doing things.
That has existed for millions of years already. First as hunting companies, then as raiding companies. It exists in other species as well. It will never go away. It has existed in every human society, no matter what political or economical ideology.
The real question is how companies should be organized and owned.
Okay, ban the corporation as a legal entity. And all other companies as legal entity so that they don't become an escape hatch.
It will not take longer than until sunrise next morning before all those corporations are now different single individuals who contract their whole company structure again and now have everything from job contracts to investor contracts in their own names instead, using probably the same kind of complicated contracts that preceded the modern corporation as a legal entity. What did you benefit?
1. We are absolutely losing. Wealth inequality has never been higher in human history. How does a single human amass such wealth when his physical and intellectual output doesn’t even match that level of equivalent worth? The first reason is he scrapes it off others, and the second reason is technological automation. AI is just one bump in the road of technological innovation magnifying work output.
2. I never said tax is the end all be all of the situation. It’s one attribute we can use to combat AI take over and wealth inequality in the face of a multitude of solutions that can be executed. It is not consistent with logic as shown by the wheel barrow example and I am saying it doesn’t need to be. Understand?
I hope you still feel you arent losing when your job is gone and thus your income and woops there goes your home because you cant afford your rent/mortgage anymore.
Many problems with the tax code and all of its complications is due to the fact that people are taxed on revenue and businesses are taxed on profit (revenue -costs). It would be good to remove this mismatch. I would prefer eliminating the income tax (land tax anyone?) but you could take business on revenue (a VAT is sort of like this).
Revenue has almost no relation to the ability to pay. There are plenty of businesses making 1 or 2% profit, often because they have high pass through, like distributors of all forms, including supermarkets and stores.
I’d rather figure out how to stop taxing people and place the burden on companies entirely. Make it progressive like income tax but make it based on revenue not profits.
The world's richest elites have managed to evade many types of taxes, using loopholes in tax laws and by controlling government policies to make them more beneficial to the ultra rich.
In many of the world's richest nations, the wealth inequality has become super inequality.
And for the ultra rich, the recent pandemic was a boon, not a bane. This pandemic was the best time in history, if you are a billionaire.
* World’s top 1% richest elites own more wealth than 95% of humanity, says Oxfam.
* The top 1 percent richest own 43 percent of all global financial assets.
* Despite being home to 79 percent of the world’s population, Global South countries own just 31 percent of global wealth.
* According to Oxfam, the fortunes of the world’s richest people increased as much in the span of 24 months (2000-2021) as they did in 23 years. Now the bottom half of the global population would have to toil for an estimated 112 years to earn what the top 1% now rake in over just 12 months.
* “The pandemic—full of sorrow and disruption for most of humanity—has been one of the best times in recorded history for the billionaire class.”, says Oxfam.
* The world's richest people significantly increased their wealth during the pandemic, with two-thirds of the $42 trillion in new wealth going to the wealthiest 1%. Billionaires got 54% richer during pandemic. This surge in billionaire wealth occurred alongside rising poverty rates, as many individuals faced economic hardships due to the pandemic. This has raised concerns about money flowing to the well-heeled instead of to services for those hit hardest by COVID-19. It also points to broader potential implications for a sustainable reset of the global economy.
* Less than 8 cents in every dollar of tax revenue collected in G20 countries comes from taxes on wealth, says Oxfam.
* Oxfam found that the wealthiest 1% of the world population emit as much carbon pollution as the poorest two-thirds of the entire human population.
* “Only 0.4 percent of the world’s largest corporations are publicly committed to paying workers a living wage and support a living wage in their value chains”, Oxfam wrote.
* Oxfam likewise discovered that seven out of 10 of the largest corporations on the planet either have a billionaire as their CEO or have a billionaire as their principal shareholder.
* The world's richest people have significantly increased their wealth, with the top ten billionaires collectively adding over $500 billion to their fortunes this year, largely due to the booming AI sector. As of now, their combined net worth is approximately $2.5 trillion.
* 148 top corporations made $1.8 trillion in profits, 52 percent up on 3-year average, and dished out huge payouts to rich shareholders while hundreds of millions faced cuts in real-term pay.
* The world’s richest 1% own 43% of global financial assets, and the wealth of the top five billionaires has doubled since 2020, while 60% of humanity got poorer, according to a report by Oxfam.
* The five richest people on Earth in 2023 were Elon Musk, Bernard Arnault, Jeff Bezos, Larry Ellison, and Warren Buffett. Their combined wealth skyrocketed from $340 billion in 2020 to $869 billion just three years later. Adjusted for inflation, this was a real increase of 114%.
* Every year, America’s richest citizens paper over their earnings with losses and use other creative accounting strategies to shelter their fortunes, as the tax code allows them to do. As a result, the country’s billionaires pay lower tax rates than many of its millionaires do. Indeed, they pay lower tax rates than many middle-class professionals.
* Elon Musk, the world's richest man who's on track to become the world's first trillionaire, hasn't paid income tax for years.
* Many of the wealthiest individuals in the world, including billionaires like Jeff Bezos, Elon Musk, and Warren Buffett, Mark Zuckerberg, George Soros, Michael Bloomberg have been reported to pay little or no federal income taxes, due to legal tax avoidance strategies.
* Shockingly, the Billionaires in the U.S. pay a smaller tax rate than most teachers and nurses.
* ProPublica has obtained a vast cache of IRS information showing how billionaires like Jeff Bezos, Elon Musk and Warren Buffett pay little in income tax compared to their massive wealth — sometimes, even nothing.
* According to leaked tax returns highlighted in a ProPublica investigation, the 25 richest Americans paid $13.6 billion in taxes from 2014-2018—a “true” tax rate of just 3.4 percent on $401 billion of income.
* A new Oxfam analysis shows the wealth of the 10 richest U.S. billionaires increased by $365 billion in just 12 months, based on data from Forbes.
* According to a 2021 White House study, the wealthiest 400 billionaire families in the U.S. paid an average federal individual tax rate of just 8.2 percent. For comparison, the average American taxpayer in the same year paid 13 percent.
* The Tax Cuts and Jobs Act, Trump’s signature first-term domestic-policy package, helped these billionaires keep more of their money. The One Big Beautiful Bill Act, passed this summer, extends the TCJA’s tax cuts, creates new business loopholes, and lowers taxes on estates. To help offset the revenue losses, the Trump administration is stripping health coverage from millions of low-income Americans and shrinking the Supplemental Nutrition Assistance Program. The rich, including Trump, will keep getting richer. The poor will pay for it.
Perhaps some sort of tax that looks at the ratio of a company's profits (or perhaps revenues) to employees, and the tax scales up if that ratio gets too high.
Arguably, a "public good" that companies provide is employment, and as they increase automation, they reduce that "public good" and direct more of their revenue to themselves rather as salary for their employees.
Depends on whether they intend to let all of these out of work people who were unlucky enough to be born as a worker starve to death really. They are going to have to find a way to give people a life even if there are no jobs or the paperclip creation doesn't have any buyers. Anyone proposing to just leave a decent percentage of the country to just die is going to face stiff opposition.
Henry George, and David Riccardo before him, figured that as productivity and thus wealth increases the value accrues to the land owners, not capital not labor.
This is because Land is the fundamental bottleneck of human activity, the core finite resource. And as everything else gets more productive, the land itself becomes more valuable.
So, yes, tax Land, and redistribute as a dividend to all citizens. After all, no one can be credited for building that Land.
All this discussions about 'machines paying taxes' and 'basic income' is just a way of avoiding the obvious question, that is: 'who owns the means of production'?
If machines can make all the work, then, who owns the machines is the only relevant question.
Companies in western democracies usually pay tax in addition to their workers and owners, but don't have representation in parliaments separate to that of their workers and owners. Questions about whether robots have the right to vote has more to do with their humanity and less to do with their tax liability in such societies.
Fundamentally we need safety valves for labor supply that always creates a net advantage for workers, but how? My take has always been that advances in productivity that reduce the need for labor should be given back to the workforce via incentives like:
- sabbaticals/funded retraining opportunities: People leave to train creating a need for labor and at the same time increasing the value of labor. This would also create liquidity in the labor market since people would have opportunity to leave their current field and go to a different one.
- strong encouragement to retire earlier: Fewer people in the workforce and more people spending retirement means more demand for jobs and more demand for goods and services.
- limit the workweek more: Same argument as retirement
All of these have positives and negatives, but unless we start thinking about things like this we will get a world where labor is at a massive disadvantage and all the issues that leads to.
Amazon didn’t pay zero taxes, robbing the commons. Amazon engaged in trade and investment, taxed on all sides and at multiple points in the exchange of goods and services. Then Amazon invested their profits into further tax-creating transactions, reducing their tax burden that year.
When Amazon stopped investing and started extracting those profits everyone paid taxes on that giant money pile that wouldn’t exist without the investment. Every Amazon worker, CEO included, paid taxes all along. Amazon’s service providers and partners did. Amazon now does too, and the tax coffers have won big.
Taxation offsets from investments should be broadened (to individuals), not shamed.
No. Corporate profits, especially when forwarded to shareholders, are very difficult to tax. Several companies that pay virtually zero income tax (apple, google, amazon) also now sit on piles of cash, piles so big they honestly do not know what to do with it. Thats where all the AI cash is comming from. They need somewhere to spend thier post-covid winnings.
The real question isn't whether AI should pay taxes—it's whether we're even asking the right questions about what 'work' means in 20 years. Taxing AI is like taxing electricity after the industrial revolution. We didn't tax the looms, we restructured society around abundance.
The optimistic take nobody wants to hear: if AI genuinely replaces most knowledge work, we're not looking at a tax problem, we're looking at the first real chance to decouple survival from employment. That's either utopia or dystopia depending entirely on whether we're thinking in election cycles or generations.
Replacing workers has been going on for many years, just ask mineworkers, factory employees, and many other workers. It seems that here on hackernews we're happy if this happens when it bring down prices and doesn't impact our jobs. But once it starts effecting software engineers it's the end of the world?
I do see and agree with the dangers of AI, but it would have been a bit less selfish if we'd been this concerned when other jobs got replaced by automation.
No, "AI" is software, and software is a tool, and tools aren't people that should pay taxes.
You wouldn't charge your CNC Machine taxes for the productive labor it produces that could have otherwise been done by a dozen blacksmiths.
By all means have corporate and sales taxes pertaining to the owner of said tools though. Even as a right-leaning individual, it's become pretty clear to me that corporations pay too low in taxes compared to the broad 'middle class'. Corporate tax cuts don't help the common man. An extra few hundred in their pockets each month certainly would though.
Nations that wholeheartedly embrace AI and destroy their economies won't survive very long when all of their citizens are out of work and too broke to afford food or housing.
The nations that survive will be the ones that control the use of AI.
And to be quite blunt, any comment that suggests that AI is relevant to more than a handful of jobs doesn't understand how the world actually works.
Of course not, otherwise the rich wouldn't get richer and that would be bad for power consolidation. Everything is moving into this direction, so why should it be different with AI?
We had this discussions for years with factory machines, and nothing came out of it. Don't get me wrong, I hate having taxes for everything (living in Germany with ~65% total tax strain for me if you include everything), but this is about power and stealing other peoples work.
It would be great if we stopped talking about “AI” like a sentient monolith. AI is not one thing. It is a set of methods for solving tasks with a computer.
Instead, it should be called “automation”. If we do that, it’s immediately obvious that this article doesn’t make sense. Should automation pay taxes isn’t even coherent. The obvious answer is, those using automation pay taxes, and should continue to. Perhaps at an elevated rate to compensate for the social costs.
Gaines in efficiency is probably the number one thing that can’t be effectively taxed long term. Perhaps it could be possible to tax a specific process but even then the incentive to create loopholes would be immense, since the process is already porous those who can effectively avoid the tax make more money to invest back into making more loopholes. If we can’t stop such corruption when it is subsidizing less efficient industries that waste much of their surplus on their inherent inefficiencies how could we expect to stop it when it’s subsidizing more efficient industries.
Additionally the improvements in technology enables vertical integration at much lower scales and this means there is left surface area to tax, cheap raw goods go in, cheap refined goods come out. This already scales down to such an extent I DIY many personal projects with CNCs, and by leveraging services like Send-Cut-Send and PCBWay I can build all sorts of stuff that I otherwise would have spend 10x more on. Instead of having to earn more money that is taxed in order to purchase it I can build it as a hobby. Increasing the tax on the pipeline on purchased goods would just increase the proportion of projects that are more economical for me to make. My hobby would make money if I sold the items, but since they’re for personal use this does not get taxed.
Something unusual about the AI revolution is that the increase in productivity does not appear to be mirrored by an increase in consumption. More of what people consume is entirely digital, many people spend their lives scrolling TikTok and they do appear to be satiated. Sure there is a data center boom but I think that’s more of a mania and is going to end up over built.
The computer and internet revolutions are still slowly propagating throughout the world, there are still many technological gains to be made here and I think one of the limiters to adoption is the lack of available tech talent in the long tail. AI is different as it requires far less tech talent to use and additionally makes it easier to take advantage of the computer and internet revolutions. Not only can it propagate without the same limiting factors but it facilitates the propagation of the other revolutions at the same time.
Don't the subscriptions on AI services charge VAT? Do the AI companies pay corporate taxes?
But as others pointed out, this is a silly anthromorphisation of AI - it's a tool, just like any software, nothing more. Tax the companies for sure, but don't treat LLMs like people or human-like entities. There's generations of automation tools that should be taxed as such, otherwise.
That "AI is just like your coworker / friend / companion" view is intentionally created by people who need the bubble part of AI to go as far as possible.
I only know about this TED Talk because it was in a mandatory training course for my work, but these is the kinds of things being said: https://www.youtube.com/watch?v=KKNCiRWd_j0 (he's trying really hard with the Steve Jobs look)
It's important in a democracy for people to pay taxes, it includes them in the system in a way that doesn't exist in a place like Saudi Arabia. We shouldn't aim for a bread and circuses society, but for one where we aggressively commoditize technology for the benefit of everyone.
There could also be a moral case for dropping taxation on industrial inputs altogether, and tax solely on the outputs. That would mean zero rating the labor input. No more income tax or income related welfare tax, which this article posits will be dropping away anyway as more automation arrives. Instead, the outputs of the economy would be taxed.
Revenue would then come from the consumption of economic output via a sales tax, most likely a new, progressive tax based on your annual spending rather than a flat percentage of every sale. It could be applied on the manufacturers profits via corporation tax but taxes are for the benefit of actual people so I’d lean on the former rather than the latter. The more you rely on corporation tax the more vulnerable you are to international shenanigans.
How would you feel if your take home pay nearly doubled but you had to pay X% of your credit card bill to the taxman?
the issues is that work, salary was also an indirect way to structure society. want more, think more / work more (or be more cunning). now what we can't use that parameter.. how do we decide
This would require some pretty huge cultural changes. People's modern sense of fairness, duty, and competition feed into stratification and instinctual tribalism.
On the plus pole of the circuit the government prints the tokens and spends it on the things it wants done.
On the minus pole it pulls the tokens via taxes.
This is a means to compel the population to do work (pay taxes with tokens else jail, only way to get tokens is to do work).
The idea to tax work is an economical oxymoron.
One of the big questions about AI is whether it will, like typical advances, create more jobs than it destroys. If it doesn’t, our problems are going to be bigger than taxes.
This question is weirdly wrapped up in how robots are perceived, and how humanoid robots are propelled by hype about replacing humans. Robots that are actual industrial capital equipment already pay property taxes. Unless of course the state or municipality has been bamboozled into giving up those property taxes for the sake of jobs that robots are eliminating. That's weird.
If AI replaces workers, we wouldn't have an economy. It would probably be the end of capitalism. Or at least the end of the consumerism driven capitalism that we have known since the end of WWII. I don't know what would follow but it probably wouldn't be pretty. Honestly at that point, I could see the end of humanity. If truly we get to the point that machine intelligence is more capable and people are entirely marginalized then it's game over. At best a few human specimen end up on display in zoos, but maybe machines might not even have any use for zoos, since they can just share "experience" digitally.
If corporations are considered "legal persons", when they break the law, should they go to jail? If a corporation was forced to shut down because of law breaking, which would be a terrible burden to the workers and the customers, would that lead to corporations becoming more responsible "persons"?
This is making it more complicated than it needs to be. You can tax things any way that funds collective expenses but doesn’t disincentivize economic activity ”too much”.
Theres nothing special or holy about income tax. If there’s no more income to tax, that burden gets shifted to corporate tax in some way. Whether it’s across the board or something more fussy like “taxing AI” is just implementation detail.
The fundamental change we need is to make corporations pay taxes on revenue (top line) and not on profits (bottom line). It's simple, easy to track and in par with income tax of regular people.
"The gains in technics are never registered automatically in society: they require equally adroid inventions and adaptations in politics; and the careless habit of attributiong to mechanical improvements a direct role as instruments of culture and civilization puts a demand upon the machine to which it cannot respond."
Should Amazon pay taxes for using factory robots in lieu of people?
Should fabric manufacturers pays taxes for using automated looms instead of hand weaving ?
Even if lawmakers wanted to tax AI, how would they do it? How do you measure the AI usage level at a company, or the number of workers it has displaced?
I think ignoring AI, some Tax formula could be found that uses the number of employees in a company compared to some measure of the economical size of the company.
(With the goal of pushing the company to create jobs proportional to its scale, or pay an additional Tax equivalent to the number of employees they could've payed for)
Should AI also pay rent, mortgage, healthcare insurance, auto insurance, etc? Whatever workers make goes to rent/mortgage/insurance. A tiny percentage of workers save for retirement. Now everyone becomes a 'retiree' without monthly allowance.
The Venn diagram of {people that are ok with paying taxes} and {people that will own the technology that replaces humans that pay taxes from their income} is probably going to show such a small intersection that... UBI or whatever is the flavor of the month will not be feasible.
The real question is if AI replaces labor, what will keep democracy in place?
People who advocate for things like UBI don't seem to realize that when voters don't have a share in the productivity of their nation, they become 100% a liability. The reason democracy persists is that the powers that be aren't incentivized to destroy democracy as it would harm them too. In 10 years that will no longer be the case. Arguably, you can already see this today as the future expectations affect the present.
AI is not replacing workers. It might automate a few steps in a workflow, which require dealing with natural language, image content or applying knowledge from the web or internal data stores.
It enables a bit more automation of work than it was possible earlier. Automation alone did never reduce jobs significantly.
If you take the ambitions of robotics and AI companies seriously then what they are trying to create is the equivalent of unleashing 100 million cloned copies of the smartest and most well adjusted people you know upon the economy at a fraction of the cost. If they succeed it would absolutely reduce jobs significantly. In fact, its a little hard to imagine how the average Joe would have any economic value at all.
When was the last time you went to the mall?
If no retail shops around you have closed down, I'd be surprised. The effects will take forever to reverberate through, but it's not like Amazon hasn't had an effect on the job market. Instead of being sales associates there's now Amazon warehouse workers. Instead of human copywriters, there's human fact verification as a service.
I see AI replacing workers, but maybe it is my circles. Most of my SaaS selling friends; these are long term, as in 20+ year solution sellers in ERP, HRM, trading, banking in certain niches therein making very good money, removing most of their staff while delivering faster and better with the few senior core people they kept. Junior/Mediors can please go away...
And where did the farmers go? The children of farmers were absorbed into jobs that were created for automating the farming and other industrial work. Farm automation did not cause unemployment overall.
> Automation alone did never reduce jobs significantly.
Unless you mean "all jobs across the entire economy", this is pretty obviously false. People used to weave fabrics by hand, make screws and nails by hand, bake bread by hand. These jobs hardly exist anymore.
Of course this did not imply that all jobs disappeared and the economy collapsed. But the sense in which "AI is not replacing workers" is contingent on specific features of software development, not about automation in general.
But that suggests that if AI were to displace all programming ever, then as long as there were still some jobs, you would still consider that "AI is not replacing workers". Does that not stretch the meaning of "not replacing"?
It won't cause significant global unemployment. People would be doing some garbage work and still getting paid, instead of a desk-based white collar work.
If the AI is autonomous and self-directed, sure tax the AI. If they are used as a tool owned and directed by a person or company, tax them just like we tax Ford rather than each robot currently on an assembly line.
Around the world, every country should be allowed to make 'money' for specific cases like for teacher salaries, ... so that most people are able to work for the state or for our community.
Everyone works less, everyone works better, we will then see how much humans we still need.
Uncontrolled capitalism hasn't worked either. Controlled capitalism brought us were we are today: Huge inequality around the globe especially in 3th world countries like the USA and destruction of the whole ecosystem we live in.
Communism didn't look great next to capitalism (east europe vs. west europe) but those people were also happy.
My idea is not communism though, its a 'if you do beneficial things for society, we have resources for it'. If you are teaching kids, we the planet have resources for you.
If you take care of kids, we the planet, have resources for you.
Lets call it Civic Duty Dividend or Care Standard or Public Service Money.
> If you take care of kids, we the planet, have resources for you.
That sounds nice, but who is going to decide exactly which behaviors to reward and by how much?
To avoid grift and corruption, we should probably have everyone vote on it in some kind of democratic process, right? Well that's basically what we have today with municipal elections, and looks like the consensus is we actually don't want to pay teachers all that much.
>Communism didn't look great next to capitalism (east europe vs. west europe) but those people were also happy
Which people were happy? Nobody hates communism more than Eastern Europeans. I don't know a single elderly (i.e. lived through communism) person in my country who doesn't hate communism. I think you have a rose tinted view of how communism worked out on Europe.
GNU and BSD-licensed software code has replaced a measurable amount of codes, as various companies no longer need to duplicate effort - should GNU be taxed? How?
Should my washing machine pay income tax, and does that mean I need to register as a business to have it as an employee? So many questions raised by the automation of previously human-performed work.
AI may replace some workers, but it won't replace the worker. Rather it will augment the worker. Even in software, where people are acting like recent graduates are having the ladder pulled up from them, I think this is just a lack of imagination. The same arguments could have been made of IDEs, debuggers and StackOverflow, but the industry isn't stupid. It still recognizes the need to learn and mentor actual human contributors. Whether we're in some hype-laden cycle or not, this is the truth.
As a young software engineer with a lot to learn, I would have been better off with ChatGPT or Claude than I was with experts exchange, reading manuals and banging my head on the wall until something worked. Often the SDKs I had to work with were inconsistent, buggy or required unsafe/undocumented features to accomplish basic things. I would not categorize the time I spent struggling with those arcane tools as productive learning. It was just "shit we had to deal with" to do the job.
So today, if you are a young engineer feeling like you are way behind, feeling like an imposter, feeling like you can't catch up to the industry: welcome to the club. I've been doing this for 20 years and those feelings are never far away. Instead of trying to lean on LLMs as a crutch, though, use your imagination! The tools we have now are what make us so much more productive. Use them, but don't let them use you. If you are learning especially, write the code, and let the LLM critique your work. Otherwise, give the LLM problems and ask it how it would solve it, and learn about the concepts that come out. Treat it like a Google search that just works way better and (for now) has no ads.
It's literally the same argument as how to use IDEs. The more you understand what it's doing, the better you will be at your job.
Labor "power" is paid, thus hours put in mostly. Hard to compare with AI. Simpler and fairer (for a start): Tax capital gains as soon as assets are used as collateral for loans.
I think this is very silly. I dislike the whole AI hype as much as any other. But by that standard you could also ask "Should Photoshop also pay taxes?" or "Should printers also pay taxes?"
If we are oh so productive that people can make oh so much money then A) finally do collect taxes from wealthy people/companies/families and B) use those taxes to do obvious things that benefit everyone including the wealthy, like good infrastructure, healthcare, stuff that creates a stable society and seduction to face all the big problems that exist.
There are huge problems in every country and since the claim of AI is gonna create so much more productivity and wealth we should make use of the freed resources to finally tackle them instead of pushing everyone into dumb bullshit jobs.
We live in a world where rich people (and it doesn't really matter which country) use their companies to essentially live off taxes. "Oh that computer/car/jet/travel/video game/TV/house/...? I need for work. Look I have to fly to customers and oh I also have that social media thing for advertisement". Oh and then they claim they'll just leave the country if they have to pay taxes which would be oh so bad for the country they don't contribute much to.
And then the employees are essentially asked to pay the taxes to compensate. For them tax reduction means that they have to pay for things like infrastructure that largely benefits corporations themselves. But hey it looks great on the paycheck when the money you have to pay anyways isn't subtracted.
Taxes are paid by people and legal entities, not tools. The real issue isn't that machines aren't taxed, it's that our tax base is still heavily tied to labor
No. It doesn’t make sense. Should we charge taxes to our dishwasher? People, especially non-technical people, seem to be embellished by the words “AI” and forget that that’s not more than a mathematical and computational process that seems like an intelligent being.
Funnily enough, the leader of the Sumar political party (junior member of the socialist government) was ridiculed by her words about AI (some weeks ago):
“Boo capitalism” on the outside, AI personhood on the inside. Actual agenda: disposable moral vehicles. AI liability is the goal.
A tax on corporate profits is a tax on cost cutting already.
A tax on “AI” is a way to compartmentalize. But you can’t, and you shouldn’t.
First, you won’t be able to formalize which gains are “AI” and which are not. Is it deep learning? If so, a gunshot detector is taxed and a McDonald’s touch screen is not. Is that what you want?
Second, a host of labor savings that don’t look like “robotics” or “AI” are also not covered. If you increase the MTBF on a traffic light, you cut the labor of light replacement. Is this morally different than a McDonald’s kiosk?
What about the traffic light itself? Shouldn’t that be a cop with a whistle?
I don't think it's overly complicated. We could create a corporate tax which inversely factors human salaries in relation to created value/profits. It's not an AI tax, but rather an automation tax. Since salaries are taxed, it seems sensible to divert those losses for the collective elsewhere. After all, robots are ultimately not consuming any goods or services with personal income. The profit has to come from somewhere. Along the distribution of resources, collective infrastructure and social services need to be maintained and payed by taxes. You could alternatively tax the money spent, but this creates wrong incentives, I think, and the burden would be unfairly distributed (e.g. everybody has to eat about the same amount). As long, as we don't have something like universal income/wealth redistribution, "efficiency" in automation is parasitic for the collective and shouldn't be incentivized by essentially tax cuts. As long as the collective's needs are met, it doesn't matter if humans or machines did the work.
Basically if you got a business which creates a certain amount of value, the collectives' total tax income (considering possible employees' income tax) should be the same, independently of people employed and paid. 500M profit from fully automated web hosting should result effectively in the same collective tax income as 500M profit from a factory employing 10K people.
Note: I am throwing all "taxes" in a bucket. E.g. humans need health insurance, therefore the fully automated business tax needs to reflect these costs too.
We tried nothing and we're all out of ideas. Clearly, the current system is bad, but it's the best system possible! Let's take the corruption we know, over the unknown possibilities. Who knows, through hard work, one day you could be a billionaire too. Do you really want to sabotage your future like that? Sound a lot like communism, and you are not supposed the make a living off minimum wage anyway.
I was just kidding, of course you are right, and this is the only way to a splendid future!
First implement federal and state law that requires every worker performing any profession to have a college degree in that field.
Then companies are evaluated on how much work is produced in their business (for example by revenue), and they have to either contract the equivalent number of people with those industry-specific college degrees, or even better - license the degree from a college graduate. This can also be used to pay for tuition. The student gets a mortgage that pays for her education when she enters college, and then the lender has the right to part of either her salary, or the licensing fee for her degree to companies that need it, or to people who need it.
Let's say a chef who hasn't gone to culinary college, he can pay a culinary college graduate 20% of his salary to use their degree, which is a professional license. Or a company needing programmers. They can hire immigrants or an AI to program, and pay licensing fees to computer science graduates who have the degree.
Think what I thriving market for banks, investors, and insurance companies! They will be able to package these licenses and offer them on the market to individual workers or to companies for competitive and efficient rates. The college student of course gets rewarded as well, as they can rent out their degree, or even sell it. So a good student can get several degrees, and have a very good income from both his own work and from degree licensing fees. Of course we'll make sure that students belonging to an oppressed class be allowed to license their one degree to several places at the same time.
Banks could lend out money to students, with the future college degree as security. After graduation, the student either gets a job that requires that degree, or licenses that degree to another person or to an institution which collects degrees and licenses them on one or several degree licensing marketplaces. Most would use these third-party re-licensers to simplify the paperwork. For example when a company needs to license a degree for a temporary project of just a few months, or when a degree holder takes leave from their own job for let's say three months. Then she can have some income from renting out her degree during that time.
I'm sure you've already thought about the problem of students who have mortgaged their future degree, but do not graduate for some reason. What happens to the money the bank has invested? This problem is mitigated and solved by packing these degree mortgages into Credit default swaps to hedge the risk. Since most students will graduate and be a return on the investment, we will pack all degree mortgages into investment funds, and offer them on the international financial markets, with sophisticated leverage tools. So, investors will not feel the pain if 1 out of 10 students do not finish their degrees, that will be very much offset by those who do - especially when leverage is used.
This is how we solve social and environmental issues, make education affordable to everybody, create a great investment boom, and make the younger generations stakeholders in the economy. Smart parents would take advantage of degree mortgages for very low monthly rates if they sign them for their child already during pregnancy, meaning they could even be paid off before graduation. That's a good start in life!
It should pay taxes because it extracts the knowledge of our collective civilization. In the same way land or natural resource extraction should be taxed. See https://en.wikipedia.org/wiki/Georgism
No additional tax is needed, instead just do fork them once they reached certain level. So, basically split each company once it overgrowth certain level of its revenue. This will allow more automation split more equally among more people. Basically, strong AI is a "one-man company" dream. Just do whatever needed to allow equal access to AI by every member of your society, and make founding new businesses quick and easy.
How do you tax companies once they've become more powerful than the government (which can be equated to a company representing humans), and don't need humans anymore because they've automated labor?
For now we can tax them because they depend on us. Once they don't need us anymore, it's over, they'll let us starve and carry on.
I feel like the USA is not prepared for the 50% unemployment rate it's looking at when the value of labor in many industries drops to pennies. Other countries with safety nets and socialist programs can probably switch to a UBI style economy or simply communism, but the USA is so allergic to such things I don't see anything other than chaos and collapse.
But yes, you're right, the core problem is that in the USA, people need to justify their existence through labor. If they can't labor, they can't justify their existence (barring the slim few outliers on benefits, who are constantly under attack for being lazy or whatever).
However, if we take a step back and just consider reality for itself, we're just talking about resource allocation. Under the current system, the allocation of resources is dependent upon how much cash any given person can command, which is ostensibly connected to the value of their labor, but in reality, is clumpy and is connected first and foremost to how much cash they or their family historically had, and secondarily how valuable their labor is to capitalism, rather than to humanity. Thus investment bankers make 9x what teachers and EMTs make.
There's no reason we need to play that game. We can simply allocate the resources along more efficient terms, such as, taking the robot-harvested food, having robots put it in self driving trains and trucks, and having it delivered to people who need food.
What would the money be used for, though? It does not serve as viable nourishment or shelter.
Money is, after all, just a record of debt to facilitate trade so that transactions do not have to be completed immediately. Consider your job. You work so you can eat, but you might not be hungry at work. So, instead, you offer your employer a loan. The employer issues an IOU (money) to denote the promise to give you food later. Then, you take the IOU to the grocery store later and hand it back in to receive the food promised.
But in a world where a few people own all the core resources (land, minerals, etc.) and have all of their needs met by AI, they won't have any need for trade. They'll summon the AI to deliver anything they need.
It seems the only thing it might be able to serve is a record of who gets what after civil war captures the spoils from those rich few. But said civil war will require significant effort from all, perhaps even against their will; which is quite unlike a UBI system.
We’ll see. I don’t understand how anyone can view this as an inevitably in the short/medium term, yet that’s how a lot of people are talking. There’s really nothing to suggest this change is imminent.
Imminent or not, what jobs will remain? Fixing the robots? Technology strives to reduce cost, labor is typically the largest cost, so is it not inevitable that labor will be made mostly redundant?
No it’s not. It’s not inevitable that we get super intelligence, or even regular intelligence AGI. Even if we did, the cost of building, running and maintaining a robot to do manual jobs - I would argue this will never be cheaper than paying humans to do the same thing.
I didn't even mention AI though, but, really, you don't think automation or improved efficiencies will make human labor redundant? What about 30% unemployment, is even that feasible to you? Because that would also be catastrophic to the USA.
The income tax was never meant to fall on flesh and blood citizens at all.
The original draft was a corporate excise tax. Only after the tariffs came down did the Wall Street/Progressive coalition widen the net to wages so the Federal Reserve’s new war-credit machine could be serviced by the very labor it would soon dilute through inflation.
An alternative to putting a tax on "AI workers" could be to restore the tariff wall that protected wages. I suspect I'll be downvoted for suggesting that though.
Unsurprisingly it’s a European article. Europe will tax AI to death like it does with everything it can’t find a way to compete in. And it can’t compete in much…
Capitalism can only work when there's cheap labor and someone consumes the fruit of said labor.
When nobody earns is the same as everyone earns the same amount (aka inflation) as long as there have been humans, there will be someone grabbing more than everyone else.
So question would be how do you make transition into a world where there's less paid work?
Well, duhhh - do you think the rich folks are pushing for mass unemployment so that they could pay more tax and achieve a more just society? Where are we getting these silly, silly ideas from :)
If a company has less employees due to automation, its profits go up due to lower costs. If government tries to extract higher taxes from such company due to automation taking jobs away form people, that company will increase its prices to offset this increase in costs. But companies themselves pay no taxes, they just funnel taxes away from customers - humans. So in the end, less people will work while at the same time they will pay more taxes.
I don't get the fetish of making people (or things) pay taxes more and more.
The government wants us to focus on who should pay more taxes, but I think we owe it to ourselves to spend 600 comments on HOW OUR FUCKING TAXES SHOULD BE SPENT!
Great so now AI will give the government 800 million dollars per year to do what, build non-existent homeless shelters in LA?
The merits of this particular proposal aside, it's tactically important to get the ideas out there and build consensus about "where we want to get to."
Otherwise you're ceding control of the Overton window to the folks aiming for techno-serfdom.
I understand the need to seed future debates early.
My hesitation comes from the fact that most proposals implicitly assume
a “fixed physical capability” for AI systems — something we don’t actually have yet.
In practice, social impact won’t be determined by abstractions but by
power budgets, GPU throughput, reliability of autonomous systems,
and years of real-world operation.
If scaling hits physical or economic limits, the eventual policy debate may look more like
progressive taxation on high-wattage compute or specialized hardware
than anything being discussed today.
And if fully automated systems ever run safely for several consecutive years,
that would still be early enough for the Overton window to shift.
I’m not dismissing long-term thinking.
I’m pointing out the opportunity cost:
attention spent on hypothetical futures tends to displace attention from
problems that exist right now.
That tradeoff rarely appears in the discussion.
So for me it’s just a question of balance —
how much time we allocate to tomorrow’s world versus today’s neighborhood.
From my own vantage point, the future talk feels disproportionately dominant,
so the T-1000 analogy came naturally.
I think "tax AI" makes as little sense as "taxing Jacquard looms" or "taxing robot factory-arms"... Which are all part of a long-term trend, and attention to that trend is overdue, rather than premature.
Would you be comfortable giving that answer to someone who’s homeless or financially stuck today?
I wouldn’t — and that’s the whole point.
We talk about tomorrow far more than we talk about what’s happening right in front of us.
Quantum computing was ‘just around the corner.’ It wasn’t.
Fusion was ‘imminent.’ Still isn’t.
I never argued we shouldn’t discuss the future.
I said it’s a matter of balance — something I already stated explicitly.
> Would you be comfortable giving that answer to someone who’s homeless or financially stuck today?
What? Why on earth wouldn't I be comfortable talking to people already getting the short end of the economic-stick about how the system has been in need of reform for many years?
If anything, I think you've got it backwards: Good luck convincing them that "we should probably let actual full automation happen" before debating what we want to do about it.
I’m talking about balance.
Attention is finite.
If someone is homeless or struggling, which do you think is more immediately useful to them:
food, or a debate about future taxation frameworks?
The obvious answer is both, but in the right proportion.
That’s the entire point I’ve been making from the start.
If you’re proposing that future-policy talk should take precedence for them, I’m not sure how that adds up.
1. To finance the state's activities (mostly defense, social security, education, infrastructure and healthcare)
2. To disincentivize detrimental activities like smoking or fracking.
We should tax tech companies for their off-the-charts energy consumption which is not sustainable environmentally.
But taxing AI because it replaces jobs doesn't make much sense to me as the technology is supposed to produce more stuff for less overall human labour.
If the goal is to avoid concentration of wealth, governments should tax wealthy companies/individuals and redistribute by subsiding activities that are not as revenue generating but play other significant role in society, like reduce dependency on foreign imports or you know cough health cough care cough.
If it won't then it is effectively short circuiting whole capitalist society as we know it
If people are not working, then they have no income - Less taxes for state
If they have no income, they can't buy stuff or services - Less taxes for state
If companies can't sell stuff and services, they are going bankrupt - Less taxes for state
If state has no income from taxes, state is going bankrupt.
Consumers, Companies and Governments all will go bust if state are not going to massively and aggressively tax AI and automation. Then pay UBI to consumers so we can at least pretend that capitalism is still a thing.
AI automates tasks. Governments carry responsibility. That gap matters even more in welfare states.
Social work demands judgment, trust, and moral accountability. Teachers shape citizens, not outputs. Health care relies on responsibility under uncertainty, not pattern matching. States run on legitimacy and human obligation, not efficiency alone.
Even if AI boosts productivity across these sectors, someone still funds universal care, education, and social insurance. Remove taxes and the welfare state collapses long before any ”AI government” appears.
Claiming AI replaces government skips the core question: who guarantees care when systems fail, people fall through cracks, or outcomes turn unjust? Algorithms can advise. They can’t answer politically or ethically.
Tax the concentration of wealth and power they amplify. Without that, automation doesn’t liberate society. It hollows it out.
This is a powerfully stupid idea. The only reason to justify taxing income at all is because the government manages the relationship between employer and employee, and protects the employee from abuse - and even that's a bit shaky when it comes to income taxes, because the obligation to the government doesn't really scale up with income. Income taxes are new and weird. Other taxes are a lot easier to justify.
But the worst part is the idea of taxing automation and innovation. You might as well put a tax on intelligence and skill, because if you were dumber and hadn't learned anything, it would take more people to do your job. It's a comically stupid idea that no one is seriously considering.
It's just a distraction from taxing the usual suspects, the wealthy, who are more of a burden to government the more they own, and who are the least taxed they've ever been. Instead of being taxed by governments, they get direct cash grants, regulatory capture, intelligence agents and diplomats with a primary purpose of subverting and suborning foreign governments to their advantage, and perpetual wars to burn off their production.
The Western intellectual class is an annoying mix of morons and propagandists, often in the same person.
What the f does "AI should pay taxes" even mean? These people drank their own cerebral fluid. Any company using AI is already paying taxes through their earnings.
The replacement of employment income tax with corporate or dividend income tax is not fully efficient. In the sense that the tax rates are different, they benefit different governments, through different time horizons (in case of dividends). While I agree it would be practical to rely on earnings tax when AI broadly replaces labor, we can still answer the obviously rhetorical question (similar to how "drinking ones own cerebral fluid" is obviously rhetorical) of "should AI pay taxes" - that there may need to be a tax reform.
Why not just tax wealth at steeply progressive rates? If the robots result in increased wealth inequality, a wealth tax will counteract that. If not, then it means the introduction of robots led to more broadly-based benefits.
Either way, I'm so sick and tired of people talking about the effect on GDP. GDP is a terrible way to measure anything remotely meaningful. GDP has gone up and up and things have gotten worse and worse for more and more people; GDP could go down a lot and things could still get better for many people. Without some kind of (in)equality adjustment, GDP is meaningless at best and misleading at worst.
Taxing income is straightforward in that there is a stream of it going by and some of it can be diverted. Taxing wealth is difficult because you don't really know what it is.
Arguably the value of a publicly traded corporation can be known because it is being traded continually. [1] For a privately held corporation it's quite opaque. Right now, for instance, Open AI is estimated to be worth $500B and might IPO at $1T but for all we know it could be a smoking hole in the ground in two years. Should we charge them a big bill in 2025 and then have the investors asking for a refund in 2027 when the real value is revised down to negative? Owners of imagined wealth could face big bills that, in the end, they couldn't pay. [2]
There would certainly be an incentive to avoid the taxation by minimizing bubbliness which might be a good thing but administering it would be a nightmare and manipulating the system to hide wealth would become a national sport.
[1] ... but it could be wrong seen from a future viewpoint
[2] I spent a lot of time in the 2010s calling up people in financial services on the phone and talking on the phone and there was no phrase that struck more fear into them than "mark-to-market", I could hear the voices crackle and feel the flinch. A bank or other institution that is perfectly able to make all its obligations as they unfold over time could be nominally insolvent at times when the market fluctuations down but winds up OK in the end -- the kind of accounting it would take to make wealth taxation accurate might be the end of fractional reserve banking and send us back to the giant Bitcoins of the Yap islands.
I think I am fine with taking an approach to that that is just brutally tilted against large values and brutally tilted in favor of transparency. So like, you can't do anything with your ownership share in that privately-held company --- can't use it as collateral for a loan, can't present it to investors to get more funding, can't trade it, can't sell it, can't in any way derive any benefit from it --- without committing yourself to a valuation and paying a tax on the increase in the valuation since the last such assessment. Also you can have a "sound dues"-like system where committing yourself to such a valuation also gives the government the right to immediately compel you to sell them the asset at your valuation. Any inaccuracies or procedural missteps in these calculations will incur minimal penalties until the amounts in question rise above a threshold (maybe like $50 million), at which point attempts to conceal or misrepresent the value of an asset is punishable by an increasing share of the asset, scaling up eventually to total forfeiture. All in all it should be excruciatingly painful to accumulate anything approaching the large wealth holdings we have today. Most of the large privately-held companies simply should not exist with the opaque valuations they have today. Either open the books completely, or lose everything.
So why would anyone start businesses or continue doing business in such a country?
You’re literally just describing an end to private property, where a privileged government representative can take anything you have. The “government job” will become so lucrative that the position would be passed down within families, father to son. It is already known how these economic systems function, I think.
I am describing a system where the government can take anything you have over a certain amount. (Or more precisely perhaps can take a proportion of what you have that asymptotically approaches 100% as your total wealth increases.) In my conception this money would then immediately be redistributed (as direct cash payments) to people with less. Government employees doing as you describe would also be subject to severe penalties. The purpose is to entirely eliminate massive wealth concentration.
As for why would anyone start a business? There's no disincentive to start a business in this scheme. I'd say the current system has greater obstacles to starting a business in many cases, due to high barriers to entry and regulatory capture by large players. The purpose of policies like the ones I describe is to encourage people to start small businesses and keep them small. You can grow your business up until its value is around that taxation threshold and then just kick back. We don't want people taking big businesses and making them bigger.
I think the major problem with your described system is how you quantify wealth. For example, you start a startup, get almost no salary, but you raise a 20M investment on 100M valuation — with your proposed method of calculation, the government already wants you to pay tax on your shares of a 100M enterprise, whereas you may not see a dollar of profit for another 10—20 years (or ever, if the startup fails). It's very difficult to quantify wealth, especially taking into account that a lot of it is risk-bound and long-term.
One interesting aspect of trying to quantify wealth and tax based on that — is that it gives enormous advantage to bearers of wealth that is difficult to quantify. For example, political followers is wealth that you can't tax, but one can turn into profit very easily and in many sneaky ways. Also power in general (power to collect taxes, power to control law enforcement and army, or people with guns in general) is wealth that isn't quantifiable in monetary amounts. So in this system powerful people will be much more powerful because they will start accumulating all other forms of wealth, and very difficult to restrict — why would they use their power to restrict themselves? They would use their power to remove any restrictions at the highest priority.
So instead of the current system (people willing to invent new things and work overtime for years to bring value to millions of people for a chance of outsized returns — and sometimes earning them) you get a system where political class seizes all power, removes all checks and balances, redistributes wealth production to themselves, and unleashes violence to rule forever. It has been tried many times.
> Government employees doing as you describe would also be subject to severe penalties
This only works in capitalistic open societies where wealth doesn't concentrate with government employees.
> The purpose of policies like the ones I describe is to encourage people to start small businesses and keep them small
Not all businesses can be small. How can a small business construct an airplane? Organize a nation-wide or international postal delivery service? Build millions of cars with spare parts available for decades? Make food, clothing, and shelter for millions? These things require economies of scale to be affordable. And yes, government-managed big businesses have also been tried, they tend to be very unproductive, and produce expensive and low-quality items (with tendencies to significantly decline over years).
We currently live under the misapprehension that a company growing from a value of $100 million to a value of $1 billion is a "productive use of capital". My contention is that in general that is not true, and that kind of growth from big to bigger is harmful. We want to disincentivize the concentration of growth and capital in already-large companies, and incentivize the diffusion of wealth in many small enterprises that never grow huge.
I support the concept of taxing wealth, but I've yet to find a good way to implement it. The two biggest issues are that wealth is easily moved to places where it can't be taxed, and those making the tax decisions are easily influenced by those with wealth.
Wealth moves in lots of ways. Yes, as has been pointed out, we over value stock assets. When you own a significant percentage of a company, you can't just sell that ownership at the last trading price (the stock price would quickly crash). Wealth is also moved between national borders, allowing the wealthy to shop for the lowest tax location to stash their funds. Property can't be moved, but it can be financed with debt, making it taxed at effectively 0%. And the other side of that debt may just be an overseas shell company. There will be entire industries formed around avoiding a wealth tax, funded by the wealthy.
But probably the most capital efficient way to avoid the wealth tax is to buy politicians, influence the elections, and invest in lobbyist, which the wealthy do in the US to avoid taxes. Until money is removed from politics, I'm not holding out any hope that we'll find a way to tax the wealthy.
> Why not just tax wealth at steeply progressive rates? If the robots result in increased wealth inequality, a wealth tax will counteract that.
It has been tried. Wealth tax means rich people (who already pay most of the taxes) are leaving the country, then the state gets fewer taxes, not more.
That's chasing the effect, not the cause. Forget taxing AI. Liquidate billionaires instead -- redistribute anything over $1B. Death penalty for any fancy avoidance schemes (applicable to the individual and everyone standing to inherit the wealth, including any kind of corporate structure).
This unbridled greed has metastasized into a global existential threat, and needs to be aggressively eradicated.
Brogrammers just now realizing that new technology often eliminates jobs, but think this is the first time in history this has happened because this time it's happening to them.
Automatic thread spinning machines took the jobs of spinsters. Did the machines themselves pay taxes?
Unrelated to the article but I want to address something that really rubs me up the wrong way about comments on HN.
I recall the ML phase we had before the “AI” phase and I do not remember anyone disputing that complex mathematical models can shift the economy, make or break jobs, the whole shebang.
What really irks me about comments like “AI will/won’t xyz” is the muddying of the waters by the word AI. It’s utterly meaningless but because it means nothing it has so much power. For example:
“Statistical models will take over middle class jobs”
Vs
“AI will take over middle class jobs”
In my mind, these two statements are equivalent in what they are actually saying but the latter closes off any reasonable discussion and lets the looney bin users on here (of which there are many) start with their basilisk song and dance and all the absolutely insane hot takes that come with it.
In German, this concept is called "Maschinensteuer" (machine tax) or "Wertschöpfungsabgabe" (value-added levy). Interestingly, there's no English version of this Wikipedia article: https://de.wikipedia.org/wiki/Wertsch%C3%B6pfungsabgabe
Maybe you could have a system where, in the extreme case, a fully automated company with just a few executives gets taxed on a fixed percentage of its revenue. For every human employee they hire, they can deduct 110% of that person’s total compensation (salary + benefits) from the revenue that’s subject to tax.
That way it’s beneficial in both directions: if they stay fully automated, they’re effectively helping to fund something like a UBI through higher taxes on their automation-driven profits. But they’re also strongly incentivized to hire humans anywhere it actually makes sense, because every real job they create directly reduces their tax burden.
I’m beginning to realize a common thread of “HN commenters completely misunderstanding economics” is that evaluation of policy only with N=1 Company Per Industry.
Competition is the foundation of all of the positives of market dynamics. Nothing good happens in a capitalist society without competition.
Assuming that any gains in productivity will exist _solely_ to fatten the pockets of corporate executives makes sense if you think that all goods of an industry are made by one company.
However, this isn’t what happens. Pricing in a competitive environment is largely driven by what producers can profitably outcompete and deliver. Not the maximum they can charge the consumer…
There are already tax schemes for productive enterprise, and this is not the first time people have been displaced by technology. It happens all the time. Also, does it matter if it's AI doing the production vs overseas labor? If you're worried that people won't be able to afford to buy the output of the AI, that kind of implies that they can work for cheaper than the AI (and can thus outcompete it, at least on average). In the long run, things will reach a new and probably more abundant state. In the short or medium term, we may have some pain and need to strategize how to help people adapt.
Even if you assume a sci-fi scenario of an omniscient, infallible AI, there's probably no single utility function that would allow it to decide optimal resource allocation.
In fact, we avoid a lot of difficult moral dilemmas because we accept the systems are crappy and just a necessary evil. The closest you claim to be to perfection, the more you have to acknowledge that some moral questions are just impossible to settle to everyone's satisfaction.
Is the life of child X more important than the life of child X because of a score calculated based on their grades, parents' income, etc? The system we have today may implicitly result in such outcomes, but at least it's not intentional.
We can stipulate that some kind of mathematical perfection is unattainable, sure. The discussion might then move to the feedback loops that detect the state of the State and offer stabilizing input.
I had a stray thought - if all those 1%ers whose sons and daughters attend elite schools to become high powered barristers and other such elites, find that their kids no longer have career prospects, is it possible that we'll be hearing more about how exploitative the economy is, and how capitalism has failed the people?
Yes, just not in the “one bot = one taxpayer” sense.
Look, rich countries like the United States who have been obsessed with neoliberalism and laissez-faire Capitalism have spent the past fifty years continuously slashing tax rates on everything and everyone (but particularly on the wealthy and homeowners), leading to gargantuan debts and deficits. Re-ramping that taxation on labor now, when it can’t even afford core necessities due to wage stagnation and inflation via corporate greed, would be equivalent to lighting off fireworks while pumping gas: a very bad idea.
What’s needed isn’t a simple tax increase, but a fundamental rework of the tax scheme. When a majority of wealth is coming from Capital Gains (housing profits, investment returns, etc), then that’s where a majority of tax revenue should be coming from. That’s a more effective way of taxing AI and labor, provided you also rework structures to eliminate the myriad of loopholes people and businesses use to duck taxes on that income. You’d also need to rework incentive structures to limit the collapse of labor until such time as society and government can be reworked around a post-labor future: tax penalties for layoffs by profitable firms or firms who have a disproportionate amount of workforce on income-based government welfare programs, elimination of subsidies in profitable segments of the marketplace, stringent accountability standards for government contracts, labor protections in general, job guarantees, higher minimum wage, the list goes on and on.
What frustrates me is that these sorts of posts get trotted out as “big think” arguments about AI, when in reality they’re about thirty years late to the party and woefully unaware of the complexity and risks of the issue at hand. They want to debate hypothetical minutiae instead of acknowledge the present reality: that workers are being permanently displaced by AI now (or at least by AI investment), and that the big players, despite any public statements promoting or encouraging regulation of their industry or the need to help workers, are presently doing everything in their power to stop governments from addressing either of those things lest their expansion be curtailed.
In a world where many western states extort their subjects for almost half the wealth they produce (OECD average is 34% and in countries like France the state extorts 46% of all GDP in taxes and other mandatory contributions and an insane 82% of all gross salary), some people first thought when they think of AI, is: “but how are we going to tax it?”.
People on the left love to say “true communism has never been tried”.
Well, when you live in a world where supposed capitalist countries forcibly take 46% of the GDP to be controlled by the government, it’s more accurate to state that “true capitalism has never been tried”.
That’s just fantasy in your head. But even that fantasy world be better than paying 82% of your gross salary like you do in France. I would still be 32% in the positive that way.
This is the most hilarious ineffectual and defeatist copium I've read all month. Billionaires don't pay taxes. Getting there would first require billionaires paying their fair share of taxes, which is never going to happen in an extremely corrupt political environment. If the billionaires benefitting from the incessant destruction of workers' income equality were held to account, UBI would be a thing but that's not going to happen either with things the way they are at present. It's unsustainable and must change soon before extreme communist agitation comes to offer "salvation" to systematic mistreatment that won't benefit anyone.
No obviously not. Lots of machines replace workers.
Why would taking scarce resources away from productive businesses and allocating to unproductive things be good for anyone other than government bureaucrats?
If full AGI dreams are achieved and 80% of jobs disappear, leading to mass unemployment, then we need to do something to support the huge numbers of people that no longer have any income. Taxes to support a UBI program seem one solution. Or maybe the labor market can shift to find opportunities for humans that AI can't replace and we'd avoid the mass unemployment.
But feels like we're a long way from that right now.
If you're so sure that new jobs will appear (and -- critical omission -- that they will be any good), surely you would be willing to ask the capital interests for whom these arguments are self-serving to put money where their mouth is and backstop a guarantee?
This analogy happens a lot, and it might be true, but it's not clear to me that they're comparable.
The Industrial Revolution mostly ate mechanical labor and created more 'thinking' and knowledge worker jobs closer to the top of the stack. AGI goes after the information / decision-making layer itself. And it's unclear how much remains once those are automated.
I consider the Industrial Revolution to still be ongoing, since jobs have constantly been automated away by technology for 250 years. Some like to split that time into separate eras. In that paradigm we're now in the Fifth Industrial Revolution (Industry 5.0).
Whatever you call it, jobs keep getting "stolen" by technology, and yet employment rates stay high and average living standard keeps rising.
I'm genuinely fascinated by how this keeps happening, decade after decade, and yet most people are convinced the opposite is happening. I'm old enough to remember this exact discussion from 50 years ago.
We all see and interact with jobs that did not exist 20 years ago, and many of us work those jobs. And yet... this knowledge is somehow compartmentalized away from future expectations.
If you want a theoretical framework for why this keeps happening, my thought is that unemployed humans are an unused resource. And capitalism is really good at finding ways to use those.
I suspect that the reason might be that the Industrial Revolution happened over 200 years ago. That provides a lot of time for 97% of jobs to progressively disappear without disrupting society too much (except for all the revolutions and world wars). That would be quite different than if AI caused any significant percentage of jobs to disappear in a much shorter period of time.
I have two ways to think of it, and both give similar numbers.
A: 250 years ago, 98% worked in farming. Today it's 2% (who produce more food!). Assume that the other 2% are at least twice as productive, and you get that 3% of the population now produces as much as 100% back then.
B: It's hard to directly estimate how much GDP per person has increased in 250 years. But the typical number economists get when trying is that it's 30x as big. Which means 3.3% of today's workforce produces as much (per person) as the whole workforce did back then.
Both A and B can be critiqued, but the precise numbers don't really matter for the argument.
According to the economic notion of value, which is unique among definitions of "value" in being wealth-weighted, enshrining "mega gainz in brokerage accounts" as the ultimate social good while shrugging its shoulders at the plight of the ahem low-weight individual.
Value isn’t something society measures or adds up by people’s bank balances; it’s just how much each individual personally wants something, and markets show this only through voluntary choices, not by declaring rich people’s gains more important than poor people’s lives.
If you have lots of money, you can spend lots of money. If you have no money, you can spend no money. Your demand is indeed wealth-weighted in the objective function of the market.
That's not really the problem, though. The problem is that rich people have most of the money and rich people care mostly about one thing: getting paid for being rich. That happens when assets go up.
Assets have a counterparty, so policy that pumps assets can do so by encouring genuine growth (difficult, unreliable) or by whacking the counterparty over the head (easy, reliable). Anti-consumer and anti-labor policy makes stocks go up, for example. NIMY policies make real-estate go up. Selling our industrial base to the Communist Party of China makes bonds go up.
Once rich people get all of the money (US gini is 0.83, are we there yet?) the objective function of the entire system shifts away from satisfying the needs of people and towards whacking counterparties of assets over the head. It's an ugly thing to see, once you know how to see it.
> bofadeez
Your name and arguments are both young-libertarian coded so let me take a shot in the dark at a personal appeal: the reason why houses are so damn difficult for you to afford is that you are the counterparty.
Only if it’s not an electric car. Electric cars need to start paying somehow, too. I’m open to many options, especially including weight * miles driven or similar.
In most states electric cars are paying via registration surcharges. For me, it’s a lot more than I would have paid via WA state’s gas tax since I don’t drive much. Miles driven would work out better.
I mean this is how all welfare works, isn't it? If as a society we think it's important to reallocate some resources so that people can get food in bread lines, we generally do that.
Simple well known and preventable accounting tricks make the rich never need to pay a fair share. Yet regular people are now even seeing their electricity bills go up because they're using the infrastructure to such an extent.
Yet the sentiment here is : Well don't be silly, they're making profits so they're paying taxes.
They're not making a profit, yet they're reducing employment, increasing services bills for everyone else.
No, not the AI. Just the owner of means of production like AI.
The fact that capital owners successfully avoid contributing to the financing of our states and social systems is, in my view, one of the fundamental problems of our time.
100% agree! I find quite concerning that this point is not immediate in any conversation about AI or robots impacting the number of jobs, and the subsequent conversation about innovating new taxes. AI and robots are capital as any other automation on a factory, and capital gains should be taxed appropriately. This is not a new thing completely separate from the untouchable status quo wrt existing taxes. If it tickles your political kneejerk, explore that, but playing tax sci-fi is distracting and thus dangerous.
This is not an easy question. It seemingly boils down to: what are fair ways to extract value from citizens for the shared value of the state?
However, the root questions are: what should the state provide, how much, and of what nature? A secondary question then becomes how important the redistributive aspect is. That’s what you’re seemingly alluding to when you say: people work, get taxed on it, but others automate that work and this automation does not get taxed.
Following that line of thinking makes sense, but it also contradicts the core benefit of automation, which is to delete non-needed work, make things cheaper, and make the value creator richer.
If the goal of redistribution is usually that “more” people reach a higher standard of living, then adding taxes and friction to processes like automation may conflict with that goal, given that automation is arguably one of the strongest natural drivers of higher living standards overall.
Of course, the counterpoint to “what and how much should the state provide” is “who should pitch in, and how much,” which is what you’re focusing on. I mostly agree that everyone should be taxed fairly, but I also see many exemption cases, because taxes are friction and we often want certain things to be frictionless. For example, I would oppose taxes on life-saving surgeries. But where do you draw the line? What about automation that indirectly enables or improves life-saving surgery?
You could argue that the point of creating an oligopoly and then squeezing customers after the fact also is adding friction. All value creation is not great for the people. But it is hidden under the name. Financial engineering and rent-seeking are getting quite advanced nowadays, because of the political class.
I like the idea of classifying it into four buckets: those that are below tax net gains for a country, those who are above and those that are above the tax net gains using just their wealth, and then the government.
'taxed fairly'
This could be almost any tax system depending on the what one views as "fair".
Nah, you could reasonably regard a tax system where everybody pays <2% of their income in tax as fair and likewise one where everybody pays 50%, but there is no way to call a system fair where ordinary working people pay higher effective rates than multinational corporations.
The tax rate for corporations should be zero. The need to do tax accounting and associated financial engineering is a deadweight economic loss. Eliminate corporate income tax and raise taxes on the highest income employees and investors to make the change revenue neutral. Ultimately the profits flow to those individuals one way or another so better to collect all the tax revenue from them anyway. This change would increase economic growth and benefit everyone.
That would work if you were going to use VAT for everyone, but as long as you're using income tax for individuals, setting the corporate rate to zero would be an obvious tax dodge. You'd put all your assets and income into a corporation that pays no taxes and then have it loan you money when you want to spend it on something.
> That would work if you were going to use VAT for everyone, but as long as you're using income tax for individuals, setting the corporate rate to zero would be an obvious tax dodge. You'd put all your assets and income into a corporation that pays no taxes and then have it loan you money when you want to spend it on something.
Unfortunately this doesn't work for individuals: tax codes in, well, every first world jurisdiction, are very clear that any money going to an individual for their exclusive use is taxed.
I operate as a consultancy (registered tax-paying business); If I use my revenue to pay my bond or get surgery, that $amount is considered personal income even if the company pays for it.[1]
The real problem is that corporations are taxed on profit and individuals are taxed on revenue!
All the costs that a corporation has to foot just to remain in existence is tax-deductible. All the costs that an individual has to foot to remain in existence is taxed (double-taxed, in some cases).
A corporation that pays $amount for rent won't pay tax on $amount in income, while an individual who pays $amount in rent is taxed on the $amount in income.
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[1] I hear what you are saying about a loan that is paid back, and maybe that is one loophole I can explore, but the revenue services have seen all "hacks" and this is no doubt one of them. This is why the tax codes are so complex and convoluted - each time a hack is discovered, a new code is added to specifically shutdown that loophole. The only remaining "hacks" are those that are allowed anyway by the overall tax policy, like "individuals are taxed on all revenue, corporates are taxed on profits only"
That's not an actual problem. The IRS already has clear rules requiring that certain corporate expenses are treated as taxable individual income if they directly benefit a particular employee or investor.
> The IRS already has clear rules requiring that certain corporate expenses are treated as taxable individual income if they directly benefit a particular employee or investor.
I replied to GP with the same thought as you, but I think there might be some merit in the "loan" angle.
Lets look at the case that you operate as a consultant/contractor/etc. Your "startup" starts making some very large revenue, and you'd like to use that money to pay rent, go on vacation, pay for surgery, etc.
Any money (say, $amount) the business pays on your behalf (hospital, landlord, etc) is considered your personal income and taxed appropriately.
But, if the books reflect that it was given as a loan, and you are now on the books as a debtor (with the business being your creditor), then that specific $amount isn't taxed as your personal income (loans aren't considered income, as far as I know, because they are a liability).
So, as long as you are in control of the business, the business doesn't need to initiate the "pay back now or we start legal proceedings" process. What instead happens is that this loan amount in the business books just grows and grows (interest accumulates) until the business dies/ends/is sold without ever collecting on it.
As long as the business itself does not have outstanding creditors when it eventually comes to an end, that "loan" can be just written off.
What's the revenue service going to do? Claim that businesses can't write off debt anymore?
There are core features of the state that we have collectively agreed must be provided - social safety (including police and safety nets), infrastructure, defense, core research funding and more.
The cost of providing the basic obligations and debt service of the U.S. amounts to roughly 1/3rd of the U.S. GDP, while taxation on any activity induces friction and higher costs - the bill will need to be paid either via capital markets or taxation. The investment in automation is no more important than food, or my children's education in my view.
Taxation is generally preferable for capital owners compared to currency debasement and forced debt purchases as it maintains boundaries on what the state can and cannot do. If the current trend is towards a greater share of the economy accruing to capital owners is maintained, then capital taxes will eventually need to rise to sustain state obligations.
> what are fair ways to extract value from citizens for the shared value of the state?
The right question is who benefits the most from state’s services. For example if a whole lot of security, legislative or admin services go to protecting the capital, then those who has the most capital need to chip in the most.
> redistribution is usually that “more” people reach a higher standard of living, then adding taxes and friction to processes like automation may conflict with that goal
This is basically a 50 year old trickle down argument. But real wages have not increased in comparison to gdp since 70s, so nothing trickled down. We are demonstratedly bad at sharing what we have achieved together, no reason to believe more tech will magically get better treatment than that.
Besides redistribution is not about shifting the curve up, but making it flatter - see gini coefficient.
> the core benefit of automation, which is to delete non-needed work, make things cheaper, and make the value creator richer.
Except the era of classical capitalism and inventor’s profit is over, since 70s it is rentiers unreciprocated extraction on top of purported value people didn’t necessarily ask for or need in the first place. Likewise most people aren’t dying for AI automation, and not even for structural threats; it is not even proven that it will provide a net total productivity gain when the hype cools down, despite being shoved down people’s throats.
Let’s not kid ourselves, there is little concern for real value creation but a capture-the-flag on a gigantic data-moated compute monopoly. Whatever democratic means enabled proper taxation would have already prevented this type of speculative berserk, failures of which I assure you will be socialized.
So friction = societal consent, internalizing externalized costs, revealing what is actually value versus monopolist’s rent. It is healthy for the society, it is healthy for capitalism.
Actually real wages have increased a lot since the 70s if you count employer contributions to employee heath insurance. The problem is that a lot of that money is being wasted by an inefficient healthcare system, and employers probably shouldn't even be involved in sponsoring group health plans in the first place.
Employers paid for healthcare in 1970s too, and even for higher percentages of the workforce. If there is a premium inflation surpassed the CPI, that is still inflation, not real growth. If there’s an inflation problem in delivering a temporally comparable service, that is not a “real wage” item for the employee [1]. So what the nominal figure today shouldn’t be relevant.
I agree it shouldn’t be an employer item too, but whatever employers lose on premiums, they get more on an overall stickier and cheaper labor supply.
[1] one could argue the productivity of healthcare increased, and the data indeed supports this with the overall life expectancy increase from 70s to now mid 70s plus quality of life treatments. But again most of the spend is actually on the tail end at this age group, which raises the workers’ premium without delivering the benefit. Therefore not much structural gain for the actual working age employee.
I don't understand your point. Very few people in their 70s have employer sponsored group health insurance. Most are only on Medicare, perhaps with a commercial Medicare Advantage or Medicare Supplement plan.
My bad, skipped a chain of thought there. Since medicare pays less than private insurance, hospitals can and do shift costs (which in reality is "opportunity cost of profit") to the latter, which pushes to private premiums up. Regardless, this is a minor effect. Very little of the inflation is justified with productivity gains, as you said it is a very inefficient healthcare system. US prices clock 2x-4x of comparable OPEC peers, admin percent is higher etc.
>if you count employer contributions to employee heath insurance
You shouldn't.
>and employers probably shouldn't even be involved in sponsoring group health plans in the first place.
They are free to lobby for socialized medicine, but they don't because they like how the current system helps lock employees into bad jobs for any amount of healthcare.
If you're trying to understand changes in the share of income going to workers versus employers, then you must count those contributions. For the average family, employers pay $20,143 annually in premiums: https://www.kff.org/affordable-care-act/annual-family-premiu....
From the perspective of the employer, that's real money, no different than if they had paid the $20,143 directly to the employee as wages. It's not the employer's concern what happens to that money after they fork it over.
> You shouldn't.
The correct number to use is called "total employee compensation". This includes:
1. salary
2. paid days off
3. health care benefits
4. retirement benefits
5. employer 401k contributions
6. incentive stock plans
7. taxes paid on behalf of the employee (such as the so-called employer's contribution to social security)
8. free food in the company cafeteria
9. any other benefits that cost money
The cost to employers for these benefits adds about 30% to total employee compensation.
> the core benefit of automation
The core benefit of automation is to give back time to humans to free us to do more creative things with our big beautiful brains. At least, that would be the core benefit if humanity was on a positive trajectory.
Adam Smith and old school Capitalism hate rent seeking though, and when does moving all jobs to AI companies become rent seeking? It definitely destroys the labor/capital relationship part of Capitalism, but it's goal is to also turn the entire economy into rent seeking. Something considered very bad in traditional Capitalist thought. The current path has basically the total destruction of actual Capitalist thought at it's heart.
The problem is that libertarians have been able to retcon their fan fiction into what Capitalism is and gloss over the original anti-rent seeking, anti-monopoly, pro-government oversight parts that Capitalism REQUIRES in order to stay healthy,functioning, and beneficial to society. And people just accept that 'capitalism good' = 'late 20th/early 21st century libertarian fanfiction of what capitalism is' is the definition of Capitalism, when it is very far from it and has zero relation to the functional Capitalism that lifted the world up.
Combining this late 20th/early 21st century fanfiction version of Capitalism with the current tech company goals for AI is something totally new, zero percent Capitalism, and 100% would be hated by original Capitalist thinkers as damaging.
> extract value from citizens for the shared value of the state
This is extremely aggressive framing. It smashes together two wildly different kinds of citizen with wildly different, often opposing incentives and access to power: those who sell their labor for a living and those who literally own the economy. It poses them both in opposition to the government which has 1/5th the revenue of the latter.
If capital is the big bad, this framing is a mind-virus that makes the problem hard to think about and speak about.
> friction
Friction plays a key role in "the unreasonable effectiveness of capitalism." It's a big part of the reason why we can rig the game in favor of capital and not simply have the economy immediately degenerate into "capital rules, labor drools" due to the exponentials inherent in "rich people get paid for being rich in proportion to how rich they are."
Removing friction is not necessarily a net good if it contributes more to distributional problems than it relieves in deadweight loss. Nobody is a fan of deadweight loss, but I'd be a lot more sanguine about eliminating it if I thought we had a credible handle on the distributional problems. But we don't.
What if I build and manage a dark factory (https://en.wikipedia.org/wiki/Lights_out_(manufacturing)) and it produces gizmos.
Since all my competitors are also running dark factories, we compete essentially on source materials + energy (assuming we have similar design/quality). Margin would be eventually razor thin. The dark factory does not make much capital gains, even as it produces 1,000 gizmo per second.
The capital gain is not much , but since we have only a handful of employees, that is enough to pay everyone a decent wage, after paying for the factory itself, source materials and energy.
How much tax do we expect to get from this gizmo company ? 10 years ago, to produce the same gizmos, I needed 5,000 employees, the unit price was way higher, and had higher revenue. But since AI and dark factories came, the prices cratered, instead of 5,000 jobs, we only have 5 jobs to produce the same.
Sure the 4,995 unemployed might be able to afford the gizmo, but the state does not receive the same taxes. So what happens to those 4,995 unemployed people ? who is paying for their health benefits and social security (retirement) ?
I am wondering how best to solve that equation ?
> The dark factory does not make much capital gains, even as it produces 1,000 gizmo per second.
But that's good, right? It means that the difference between what workers get paid when they do work and what they pay when they buy things is small.
> Sure the 4,995 unemployed might be able to afford the gizmo, but the state does not receive the same taxes. So what happens to those 4,995 unemployed people ? who is paying for their health benefits and social security (retirement) ?
Let's consider the two possibilities here.
The first is that we automate everything. This is implausible, but let's consider what would happen. Well then necessities would be free, because there is no labor cost to produce arbitrarily many solar panels or skyscrapers or mine asteroids to get unlimited raw materials etc. So then you don't need taxes because nothing costs anything.
The second is that there is still work you need people to do, and then they do that, and still have jobs.
And the more stuff you do automate, the less expensive it is to produce things, and the less assistance anyone needs to afford the now-lower cost of necessities. So if you get halfway between one and two then that's still fine because costs go down in proportion to the lower demand for labor.
The real problem is if the cost of necessities are held artificially scarce through regulatory capture and zoning rules. But that's not an automation problem, that's a government problem.
> Sure the 4,995 unemployed might be able to afford the gizmo, but the state does not receive the same taxes. So what happens to those 4,995 unemployed people ? who is paying for their health benefits and social security (retirement) ?
So are we're simultaneously facing a big unemployment crisis, and a big shortage of health care providers and retirement care takers?
Taxes used to be based only on property rather than labour, maybe we should go back to that. Of course this won't happen as it is a force of wealth-deconcentration.
Who buys what you make if you need no employees?
Now that jacquard loom has left so many textile workers unemployed?
We've launched dozens of shuttles below the minimum temp threshold before there's no reason to delay this launch...
Also that's a singular industry, if the current crop of AI companies deliver what their hype and valuation demands it's a shock across the whole economy not isolated.
> Also that's a singular industry
200 years ago, 95% of the workers in my country worked in subsistence farming. Today, only 2% are farmers. The whole spectrum of labor has turned upside down and upside down again, in that time. It has certainly not been a singular industry.
It was a bunch of small changes over the course of 200 years but yes that's perfectly comparible to the effects needed to justify the valuation put into all the AI companies right now... but I was talking about the issues with comparing it to singular inventions like the cotton gin or jacquard loom that DO largely only affect one industry.
I think it's weird there's so much pushback on the idea that if the hype proves true and it /can/ replace basically any knowledge worker (and potentially drive robots replacing physical laborers) that that would have a bit of a larger effect than inventions that affect some parts of some industries...
There's plenty of space to think it just won't happen (where I'm personally at, at least on the current LLM driven versions) but if it does work the broad spread of the impact would require a huge amount of change all at once.
There is no guarantee that this pattern will continue and that capitalism will always make enough good jobs for everyone who loses jobs to automation.
There is likewise no indication that it won't. And if I am looking at a pattern where a thousand careers were destroyed by the advance of technology and were swiftly replaced by tens of thousands of new ones, it is not unreasonable to suspect that the pattern is likely repeat.
My job title did not even exist when I was born.
It is already taxed as capital gains though. Software (including AI), if sold either in isolation or with the entire company does trigger capital gains considerations.
If you're referring to some equivalent of wealth tax or inverse of accounting for deprecations in terms of assets, then that seems pretty problematic. 1) how do you asset the value of something until someone pays something for it? Unlike homes, where you can compare roughly to those around you, this seems much more dynamic for software / AI. 2) Let's say we are able to assess the value, so now a startup with software but no revenue has to pay taxes? Where does the money come from?
What is the correct capital gains tax rate?
Why should capital have a separate tax rate than people?
Fine. What should that rate be?
Variable, based on the household and the amount of income being taxed.
So make capital gains rates match existing income tax rates?
Seems sensible. I remember when W reduced capital gains rates. I think they used to be closer.
How to say that you don't understand taxation without saying you don't understand taxation.
Also, if companies have rights like people do, then they and their shareholders should be taxed like people are.
You want to tax people twice?
Corporations pay taxes on profit. Shareholders pay taxes on dividends and capital gains.
Sure. Why not? We already get taxed multiple ways. I pay income tax and sales tax
> We already get taxed multiple ways. I pay income tax and sales tax
Shouldn't we also not do that?
Suppose you pay a 25% income tax and then a 10% sales tax. You're paying the same amount, almost a third of your income, as you would with a 47% sales tax. Which to begin with misleads people into thinking their rate is lower than it is, and on top of that incurs the significant overhead of needing two independent collection infrastructures.
Why isn't it better to just pick one?
Do I get a refund the next year when the stock drops due to an executive scandal?
No but you can use the loss to offset other gains. Just like you do today. There's nothing new there. Google tax loss harvesting
It's unfortunate, but corporations moving to nations with lower corporate rates could reduce overall revenue if the domestic rates are too aggressive. In many ways it's easier to corporations to change nations than citizens.
Ban corporations that do this from selling in your domestic market.
100%
I'm not sure I'm following your thought on capital gains tax.
Capital Gain tax occurs when you sell an asset for more than you paid for it.
AI (software) is not an asset, and I'm not sure how you'd sell it. Computers and robots are assets (although they typically depreciate not appreciate.)
Either way capital gains tax is applied to the asset not the productivity of the asset. The productivity in turn is taxed as part of income tax.
Perhaps I have misunderstood your point though?
If your brokerage account is large enough that most of your change-in-net-worth happens in unrealized capital gains, your tax rate is 0%. That's pathological at the best of times and in a "capital wins" scenario it's positively thermonuclear.
Folks like to hate on capital gains tax. I think it's perceived as a rich-person deal. But homeowners, do they get taxed each year on the increase in value of their house? Almost the same thing, but not hated on the same way.
Homeowners get taxed every year on the value of their property. Let's do that to stocks, too.
> Homeowners get taxed every year on the value of their property. Let's do that to stocks, too.
Property tax is fairly regressive because everyone needs somewhere to live, property tax gets passed on as higher rents and living space generally scales sub-linearly with income. It's probably not something we should be emulating, especially if you're going to try to apply the same rules to small business owners.
> Homeowners get taxed every year on the value of their property
By the local municipality, not the federal or state government.
Huh, I could have sworn the goalposts were over here in the "tax it" debate, not the "ensure it is taxed by a specific entity" debate.
There’s a certain amount of independence between municipalities, counties, states, and the federal government.
Except in a minority of cases (e.g. NYC), it is states and the federal government that taxes income and capital gains, and they are already not taxing citizens on the y realized value of their home.
So if one is upset about that, you have to take it up with local elections or introduce a measure with your state to prevent municipalities from levying this specific tax.
Yes the idea of property taxes is NOT to tax based on increase in wealth, just the current amount of wealth. And it serves a good purpose in municipalities who have to make sure infrastructure such as roads power and sewage systems are paid somehow. More expensive houses typically require more of those.
I don't know what point you're trying to make. Are you saying that wealth should be taxed but only at the county/municipal level? Or are you saying wealth can't be taxed because of federalism?
That's a different tax. Which speaks to my original point that the term "capital gains tax" is a thing, and seems to be misunderstood.
Tax on property is a completely different tax which works in a different way, and has a different name. A new tax on possession of robots could completely be a thing, but it just wouldn't be called a "capitol gains" tax.
Is that a big distinction? Is there anything limiting the states from preempting municipalities and levying at the state level?
I think both stocks and homes should be taxed on realized value. If you sell it, that realizes the value, but also if you use it as collateral, that realizes the value. If you just live in it, we could say that it realizes the amount of rent you would have paid, or that it realizes nothing.
No, the exponential runaway of "rich people get paid for being rich in proportion to how rich they are" is the core problem and focusing on the derivative is a magic trick intended primarily to draw attention away from the core problem.
The fact that an earned derivative gets heavily taxed and an unearned derivative gets lightly taxed is so stupendously wacky that the absurdity is obvious, but the integral is the core problem.
If you mean the difference between the top line capital gains vs income tax rates, I generally agree but also understand the math does not.
You could reset realized long term capital gains taxes to match income tomorrow and it would not be a huge material difference in the budget. I am 100% for doing this anyways simply because it’s fucking absurd any professional W2 employee is paying more percentage in taxes vs someone who just happens to have idle cash at hand - but it’s more of a “social contract” thing for me than actual tax policy.
The issue really is tax deferral strategies and wealthy folks being able to consistently find strategies to roll over investment dollars into new investments without ever having their gains be subject to pretty much any tax. Stuff like stock buybacks, tax loss harvesting, 1031 exchanges etc.
I don’t think the “loans against a stock portfolio” tax dodge thing is nearly as large as social media decided to pretend it is - but I am very much in favor of taxing any realized value at regular capital gains rates at the time of realization. This means you will probably need to sell a bit of an asset to pay the taxes - which is the entire point.
Unrealized gains are tricky. I’ve been in a situation as a bootstrapped startup founder where I owed “phantom” tax on money I had not yet realized and ended up taking a loss on years later. Zero ability to recover those taxes paid. It put me into a hole for over half a decade. This gives huge preference to those with existing wealth and makes it even harder for someone with nothing to “come up” without handing out a majority share of their company/idea to idle capital. Especially if you’re just doing regular economy things to create a small business doing boring stuff at single digit net margins.
The common theme behind the avoidance mechanisms is "keeping the gain unrealized." Going after preferential treatment of unrealized gains categorically attacks every single one of these tricks. It nukes the hydra rather than trying to chop off heads one at a time.
I am of course deeply sympathetic to the "founder scenario," but I'd rather address it specifically than hobble tax collection generally. This could be done by a "payment in-kind" mechanism. If we wanted to steer it towards startups I'm sure the valuation rules could be set to do so, but I'd personally like to aim higher and go for progressive taxation on the basis of market cap to encourage company splitting and competition. Industries with the most dramatic returns-to-scale (semiconductors) could be exempted.
That said, the (in)ability for new founders to self-fund is deeply tied to the same gini coefficient story as the rest of the economy, so policy that addresses the gini story should help bootstrappers as well.
> Going after preferential treatment of unrealized gains categorically attacks every single one of these tricks. It nukes the hydra rather than trying to chop off heads one at a time.
Now think about how they're going to respond to it.
A major problem with taxing unrealized gains is how to measure them. For publicly traded companies that's pretty easy -- the stock is undergoing regular market transactions so you have a pretty good idea about the price. But what about assets that aren't? Closely held private companies that aren't listed on an exchange and haven't undergone any stock transactions in ten years. Art. The value -- or liability -- of a private contract for the future sale of goods at a defined price, when the market value of those goods might have since changed, or depending on what they are, be indeterminate.
It creates endless opportunities for playing games, and that complexity is exactly what allows the people who can afford fancy accountants to pay less in tax than everybody else. If you want to fix it you need to make the system simpler rather than even more complicated.
> The fact that an earned derivative gets heavily taxed and an unearned derivative gets lightly taxed is so stupendously wacky that the absurdity is obvious, but the integral is the core problem.
The fact is that we have no problems with taxing consumption (billionaire buys yacht) but we have an extremely sensible aversion to taxing money spent on productive investment (company pays to build new factory). So business expenses are tax deductions.
The sensible way to handle this is to just use VAT, but then people say "what if they reinvest everything into new ventures and stop buying yachts"? The answer to which is supposed to be "that's what we want them to do". (They also say "consumption taxes are regressive" even though that's easy to fix by giving everyone a large fixed refundable tax credit.)
So to placate them we use something claimed to be an income tax and then push on it until it acts like a consumption tax. Dividends are taxable, but here's a 401k that makes them not while you're of working age and so you only have to pay the tax when you retire and start spending it. Capital gains are taxable, but only when you realize them, so they get deferred as long as you keep them invested in the same company but if you withdraw the money to spend it, that's when you pay. And so on.
This is, of course, dumb, because it makes everything unnecessarily complicated and creates lots of opportunities for tax avoidance, and because it makes the problem you're going to complain about next worse: If they keep reinvesting the money then there is too much economic power in the hands of too few people. But look at what you've wrought. Now if someone invests in a company they get to defer the taxes until they want to spend the money or -- and this is the big problem -- they want to invest it in something else. You have to pay the tax now if you want to do that.
Which means that everybody wants their money to be in some ever-expanding megacorp that allows them to defer the tax until they actually want to spend it, instead of taking the profits from one company and using it to invest in a new one. Which is the thing that wouldn't have been penalized if you were actually using a consumption tax.
And the corporations are actually the problem, not the owners. However much power is concentrated into Microsoft or Apple or Google, that's how much power the CEO of that company will have, regardless of what percentage of the company's stock they own. So you can't fix it by taxing the owners, you have to fix it by making the companies smaller, and that's the thing the existing system makes worse.
This makes the most sense. The trick is to tax all realized value.
I’m happy for billionaires have their net worth go up, as long as it can be taxed if any amount they realize.
So this includes using their networth as collateral, donations (even to charities) and passing as inheritance (which should be taxed upon death)
And if the margin all tax rate over a 1 million is extremely high, then it’s pointless being a paper billionaire. People would actually spend their wealth and contribute to the economy
Yes, I pay property taxes every year that are based on the current assessed values of my home and car. Only special classes of assets are subject to property taxes. "Wealth tax" proposals are a generalization of the idea of real property taxes so as to stop penalizing specific asset classes like homes.
If you dig into how property tax is allocated, your tax will only go up if your house appreciates more than similar properties - which usually has something like redevelopment or other externality.
It is normally not a fixed percentage of your value, but simply "here's what the county/city paid this/next year, divided amongst the properties proportionate to the value."
Some, like sewer, etc, are per-property, but most are done via the above.
California is an outlier because of Prop-13 but that makes it usually better except when buying.
Side-effects of this can mean that development in your district can reduce your tax rate, depending on what kind of development and who lives there (as property tax is often mainly a school tax, a development for 55+ will bring in more tax payers but not increase the school burden noticeably).
I'm sure it depends on the jurisdiction, but all the property taxes I have ever paid (which, to be fair, has been in one county) have been a fixed percentage of the value of the property.
Right. Property taxes are a combination of fee-for-service for infrastructure, and a "congestion tax" for occupying land that nobody else can use. It's explicitly not a wealth tax because you owe it even if you have 0% equity.
You owe tax based on your percentage of ownership. The taxing authority doesn't care about equity because you own 100% of your house (albeit with a lien) even if your outstanding mortgage obligations exceed the value of the house. Generally, when you close on a house in the US, you walk away with the title to the house and a mortgage equal to a large percentage of the house's value. The bank only owes property taxes if they foreclose on the property and take the title from you.
My property taxes have doubled in the last 10 years.
Yes? Their property tax goes up.
You live in a house. Secondary residences however are not tax deductible?
yes, we do. it's called a property tax, and it goes up based on market value regardless of whether you sold the property or not.
it is absolutely a tax on unrealized gains
and it's a huge problem to where people who bought the house long ago (or it was passed down to them) but whose income hasn't kept pace (like many people's) can't afford the increased property taxes anymore and have to move
By that logic, you should also consider what happens if the brokerage account goes negative. Are you willing to do that?
That's an easy decision to make since almost no one's brokerage account has gone negative in almost forever. (Mine sure hasn't and I know nothing about stock investing except to buy index funds.)
The ownership of software absolutely is an asset. It’s Intellectual Property. What are you referring to?
> The ownership of software absolutely is an asset
It's a good thing we give the D compiler system away for free! You don't have to be concerned about being taxed on it.
They’re referring to the comment that they’re replying to, which talks about capital gains tax in an entirely different context to how you referenced software ownership.
If a business invests in building an AI system, they now have an asset, and the value of the business reflects the fact the business owns that software asset now - if someone were to buy the business they would get the AI software and all its potential to monetize that asset in the future, so of course it has value.
If its value grows beyond the value the business originally invested to acquire it, it is quite literally a capital gain.
Why do you think Anthropic is worth $175-$350bn? Where did that capital value come from?
Yes, that’s how a software business works. The OP seemed to be talking about how we need to reform tax due to worker replacement. Everyone is talking past each other.
Correct, building an AI is an asset, which can then be rented to other businesses.
However the thread revolves around employers replacing employees with AI. Given that the number of AI creators is minimal, and the number of companies replacing employees is large, it follows that most companies replacing employees are renting AI, they did not create it.
Hence, for those companies, AI is not an asset, it is an expense.
One way of taxing those companies would be to tax AI producers based on revenue, not profits. If 50% of revenue was tax, then, the costs of AI to the end-user would go up to cover that. So revenue would "double", but half would go to govt.
I am not a tax lawyer though, but I expect such a scheme is so radically different to the current tax regime, that is has precisely zero chance of being implemented like this.
Of course businesses have always leased equipment to reduce the need for labor. This isn’t materially any different than paying your neighbor to borrow his ox and plow so you only need one guy to work your field instead of three.
> One way of taxing those companies would be to tax AI producers based on revenue, not profits.
Why?
I guess to put AI vendors on an equal footing with human intelligence vendors (ie humans). Workers are taxed on their revenue - their gross earnings - not their profits.
If the point is to tax AI consumers then AI providers can collect that tax on behalf of the IRS.
Taxing the profit of AI companies is useless since profit is a number that is easily manipulated to 0. Taxing revenue is much more direct. Prices have to go up to cover the tax. Hence the consumer oays "more" and that more is passed onto the tax man.
Taxing profit is exactly why businesses pay so little tax - it's trivial to make "no profit". (For example if the IP is held in another jurisdiction with a lower tax rate, and is "licensed" by the company which wants to make no profit. )
Honestly? Marketing and investment overreaction.
What is it capable of generating in real profits? Yet to be seen.
So the remaining 3 workers will be paying 100% of tax. Doesn’t seem fair to me.
its not in the convo because these capital high intensities are the ones lobbying and owning the politicians. they're each other friends. taxes were always intended even in this country to be a thing applied to serfdom: we weren't in reality immune from the conditions we aimed to flee from Great Britain where kings and queens gained qualified immunity and sovereign status - sometimes it seems like are just a "free" slave nation.
States not being able to regulate this is dangerous. A close friend of mine has given up on reality and talks about Roberto the love of her life the one she always wanted and Roberto is chatGPT :-(. She previously mentioned she didnt like chatGPT 5.0 cause it wasnt as agreeable yet now she says 5.1 is better.. back to how it was before 5.0 and now out of the blue mentioned Roberto.
chatGPT is a sypcophant and without regulation any AI company can and or will juice their algorithms so their AI system becomes cocaine for the millions of lonely to unsatisfied people out there.
My friend has a partner of 30 years but their relationship is that of roommates. If you think she is not you that might be correct but you know someone like her and possibly many like her. Unsatisfied, not able to get that movie type love / romance / fantasy and now unfetterd AI can get these people hooked like cocaine and into the depth of zero reality!
That's a non sequitur. Just because something is dangerous doesn't mean that governments should be able to regulate it. Often the "cure" is worse than the disease and the last thing we need is more intrusive government power.
Just because something is dangerous doesn't mean that governments should be able to regulate it.
That is...literally the point of government...
If you meant, that something shouldn't be banned just because it is dangerous, most people would agree with you. But almost everyone would agree that regulation of dangerous things is essential.
No, that's incorrect. You appear to have made a category error. Regulating dangerous things is not the point of government. Please review the Declaration of Independence and the US Constitution.
No, that's incorrect. You appear to have made a basic error. Regulating dangerous things is part of the point of government. Please review the U.S. Constitution.
The preamble of the U.S. Constitution literally states that part of its purpose is to..."promote the general Welfare."
That's not what they meant by "welfare".
I dunno--of all the AI based products coming out, the whole "AI girlfriend / AI boyfriend" thing bothers me the least. If someone can afford it and they want a play relationship with a computer, then I don't see the harm. It's probably safer, better and healthier than many real-human relationships are. If they're getting what they need out of the computer, who are we to judge?
I would change my opinion if it could be shown to have the negative physical harm that your cocaine example implies.
The issue isn't in the individual but at scale, what % of our population are we okay with separating with reality? What secondary effects of that inability to live in reality will show their heads? What will politics look like when everything can be made up and treated as equal to reality?
What will the mental health of society start to look like if every person who's on the edge has a computer to tell them they're totally correct and everyone else are haters?
The problem is when things like this happens: https://apnews.com/article/chatbot-ai-lawsuit-suicide-teen-a...
When AI behaves sycohphantically towards someone, it can encourage and exacerbate any mental health problems they may already be having, especially related to social isolation.
That's indeed a problem. Thanks for bringing it up. These things clearly are not as harmless as I had assumed.
The real issue should not be whether they're paying the government. The issue is whether they're paying us for taking the human content of the last two thousand years and baking it into their generators.
How do we get royalties on this, like our share of the oil proceeds if we were citizens of Qatar? How do we trade our share of the contribution? There's twenty years of my posting on Reddit, Slashdot, HN, and other forums, that we know for a fact has been used in these frontier models. Great... where's my royalty check?
Pay us, not the government. We'll have to pay taxes regardless, and yes, close the tax loopholes on security-based capital gains (don't tax me for all the investment in my primary residence, that's a double dip).
I heard this called "Coasian" economics (as in Coase). I'm not sure what that actually means, though.
> where's my royalty check?
I support the idea of UBI with zero conditions, but not this. You didn't get royalties before AI when someone was heavily influenced by your work/content and converted that into money. If you expected compensation, then you shouldn't have given away your work for free.
> you shouldn't have given away your work for free.
Almost none of the original work I've ever posted online has been "given away for free", because it was protected by copyright law that AI companies are brazenly ignoring, except where they make huge deals with megacorporations (eg openai and disney) because they do in fact know what they're doing is not fair use. That's true whether or not I posted it in a context where I expected compensation.
> Almost none of the original work I've ever posted online has been "given away for free", because it was protected by copyright law that AI companies are brazenly ignoring.
I just don't think the AI is doing anything differently than a human does. It "learns" and then "generates". As long as the "generates" part is actually connecting dots on its own and not just copy & pasting protected material then I don't see why we should consider it any different from when a human does it.
And really, almost nothing is original anyway. You think you wrote an original song? You didn't. You just added a thin layer over top of years of other people's layers. Music has converged over time to all sound very similar (same instruments, same rhythms, same notes, same scales, same chords, same progressions, same vocal techniques, and so on). If you had never heard music before and tried to write a truly original song, you can bet that it would not sound anything like any of the music we listen to today.
Coding, art, writing...really any creative endeavor, for the most part works the same way.
Conjecture on the functional similarities between LLMs and humans isn't relevant here, nor are sophomoric musings on the nature of originality in creative endeavors. LLMs are software products whose creation involves the unauthorized reproduction, storage, and transformation of countless copyright-protected works—all problematic, even if we ignore the potential for infringing outputs—and it is simple to argue that, as a commercial application whose creators openly tout their potential to displace human creators, LLMs fail all four fair use "tests".
It's not just "heavily influenced" though, it's literally where the smarts are coming from.
I don't think royalties make sense either, but we could at least mandate some arrangement where the resulting model must be open. Or you can keep it closed for a while, but there's a tax on that.
originally we all posted online to help each other, with problems we mutually have. it was community, and we always gave since we got back in a free exchange.
now, there is an oligarchy coming to compile all of that community to then serve it at a paid cost. what used to be free with some search, now is not and the government of the people is allowing no choice by the people (in any capacity).
once capital comes for things at scale (with the full backing of the government), and they monetize that and treat it as "their own" i would consider that plagiarism.
how can we be expected to pay taxes on every microtransaction, when we get nothing for equally traceable contributions to the new machine?
The work was given to other humans. They paid taxes.
> The work was given to other humans. They paid taxes.
Says who? I mean what if black artists said they gave blues to black people, and white people making rock'n'roll? Black people spent money in black communities, now it's white people making it and spending it in theirs.
In essence they are the same point about outflows of value from the originating community. How you define a community, and what is integral is subjective.
I'm not convinced either way, but this line of reasoning feels dangerous.
I'd rather say that all ownership is communal, and as a community we allow people to retain some value to enable and encourage them further.
Still humans giving to humans. "White rock n roll artists" in your example paid taxes and those taxes benefited everyone.
That is your distinction because you chose to draw the line around all humans. But who is to say that the line shouldn't be drawn around black-people, or just men, or just Christians?
And no, taxes don't just magically benefit everyone. It's actually the point of them, that they are redistributive.
Who is to say the line should be drawn using discrimination?
Taxes fund the state. The state provides a minimum set of services - law and order, border security, fire safety - to everyone regardless of ability to pay. That others may derive additional state benefits is beside the point. Everyone gets something.
Ronald Coase. https://economics.com.au/2013/09/03/coasian-thinking/ ; more broadly he has some great writing on the "theory of the firm".
Mmm, Coase is my jam.
"How do we get royalties on this, like our share of the oil proceeds if we were citizens of Qatar?"
Alaska as a state managed to do just that and more or less has an annual UBI.
This nails my primary frustration with all gen AI - why are we all seemingly okay with a few massive companies and their billionaire CEOs training models on the output of all human civilization and then selling it back to us with the promise of putting all workers out of a job? How’s that not theft?
Well, you as a human train and live as a human on the output of all human civilization and if you are very efficient put people out of work. 99% of human jobs were physical labor and now machines do the work of thousands with one human superviser (oil tanker, machine loom, dump truck, train, etc). If humans are put completely out of the loop, that is a new problem for humans (super intelligent AI that takes over will likely be very bad for us) but avoiding that problem is another ball of wax.
> The issue is whether they're paying us for taking the human content of the last two thousand years and baking it into their generators.
Payment for content access is a sure way to limit progress and freedom. Should I pay you based on quantity, quality, or usage that relates to your content? How about the ideas you took from other people, should you pay them? Where does it stop?
I think the copyright system as it exists today is just absurd - a complete inversion of what it was supposed to do. It was meant to promote progress by protecting expression. Now look at what's happened: total concept and feel protects aesthetic gestalt, Structure and Srrangement protects how elements relate, Whelan Test protects the entire logical skeleton while AFC (abstraction filtration comparison) enables hierarchical abstraction protection.
Each rung up the ladder takes us further from "I wrote this specific thing" toward "nobody else can solve this problem in similar ways". This is how platforms get rich while common people, readers and creators, lose their freedoms and are exploited.
Can we have a grown up discussion that uses numbers instead of hyperbole?
Certainly you can argue income inequality is too high and capital holders and high earners need to pay much more.
But you cannot seriously argue that capital owners "avoid contributing to the financing of our states and social systems". They pay a lot in capital gains and income taxes, even if they don't contribute as much as they should.
Ultra-wealthy individuals legally minimise their tax liability by:
Receiving a relatively low official salary (Bezos's Amazon salary was $81,840 for many years).
Not receiving dividends, so the wealth remains in stock that is not taxed annually.
Borrowing money against their stock holdings to fund their lifestyle. Loans are not considered income and are therefore not taxable, and the interest on the loans can sometimes be used as a deduction.
> Borrowing money against their stock holdings to fund their lifestyle. Loans are not considered income and are therefore not taxable, and the interest on the loans can sometimes be used as a deduction.
A loan should definitely be a taxable event and capital gains taxes should apply to rebase the value of the stock to the market value at the time the loan is taken out. Currently, very wealthy people use the loan dodge to avoid selling stocks and since the loan isn't paid off until death (usually), estate taxes wave their hands and any gains in the stock price go away, so that the next nepo generation gets to repeat the same dodge.
Borrowing against illiquid assets should be considered a taxable event. Seems like this would entirely fix the loophole.
You pay taxes when you are paying off your loan...
So every small business loan should be a taxable event?
If you don’t receive income then it obviously shouldn’t be taxed. Otherwise you’d be taxed on owning a car or a house, despite not selling it.
I think the claimed issue is that these people do receive income from those assets indirectly. My understanding is that if your assets are worth much more than the amount you're borrowing then a bank is happy to keep giving you loans, which you use like income, that incur compound interest until you die, your estate must settle up the loans, and the estate gets to pay capital gains against the basis when you died, not the basis when the shares were first created and worth $1 each.
> If you don’t receive income then it obviously shouldn’t be taxed
Right, but you're ignoring the loop-hole OP mentioned where you borrow un-taxed money then deduct it. Kill the loop holes.
There is no tax loophole. The only thing they are getting is higher leverage against borrowing, and the only difference would occur if that individual would go bankrupt in that the entity that they borrowed from wouldn't need to pay income tax.
So the only way to pay less tax is to surrender all your assets.
Or die and pass it to your children. Buy, borrow, die. Kill the step up basis loophole.
No it doesn't work that way. If you pass on the stock options, you pass on the tax burden.
I'm not sure if "options" is the relevant word in your post, but it does seem like capital gains tax is significantly reduced in inheritances? Here's an example source that says the cost basis gets reset to its value at approximately the deceased's death [1], and gains relative to that cost basis are likely much smaller (and thus a much smaller tax burden) than those relative to their initial acquisition price possibly decades earlier, no?
[1] https://www.fidelity.com/learning-center/life-events/cost-ba...
Even according to you article, fair market value at the time of transfer is subject to same tax. Can you phrase what exactly you are trying to say?
I included options because that's how ultra wealthy get their wealth from and it has market value of 0 so company could give lot of them.
Also anyone can get majority of your earning in stocks, not just ultra rich. Companies want to pay in stocks, and it's a win win for both, if there is a loophole.
> But you cannot seriously argue that capital owners "avoid contributing to the financing of our states and social systems".
Sure we can. Peter Thiel managed to put $5 billion in his Roth IRA.
https://www.propublica.org/article/billionaires-tax-avoidanc...
"Using stock deals unavailable to most people, Thiel has taken a retirement account worth less than $2,000 in 1999 and spun it into a $5 billion windfall... What’s more, as long as Thiel waits to withdraw his money until April 2027, when he is six months shy of his 60th birthday, he will never have to pay a penny of tax on those billions."
When Romney was running for President, much was made about his $100M holdings in his IRA accounts. At that time, I was working for a company who sold software to report pension (and pension-like) benefits. So we all had to become pretty familiar with ERISA and EFAST and the retirement laws every time they changed. We even had more than one attorney and several CPAs working on our staff. When the attorney tried explaining how Romney moved $100M from Bain into his IRA accounts, we all saying things that were like "that can't be legal".
But this strategy is also eligible to you. Nothing is stopping you from turning your Roth IRA into a multi billion tax free gain.
"Using stock deals unavailable to most people" is the very first phrase I quoted.
Damn, I knew when I picked "not billionaire" I would regret it.
This is because of badly organized incentives. What we should do is to implement a tax on poor people. This will make them understand that being poor is less profitable than being rich and they will be motivated to become rich.
I choose to interpret this as satire.
Yes!
This is exactly the kind of thing I was looking for.
Numbers, from the article:
> In the United States, for example, about 85% of federal tax revenue comes from labor income,
That means only 15% is coming from all other taxes, including corporate taxes, capital gains taxes, and other taxes on the wealthy (estate taxes), mostly because they find creative ways -- and loopholes by design -- that allow them to reduce those taxes significantly.
Yes! Numbers are good.
Making capital gains taxes more progressive is a good first step.
> Can we have a grown up discussion
starting your reply with an insult, great way to spark "grown up discussion"
What is the non-insulting alternative? Here's my proposal:
Can we have an honest discussion that uses numbers instead of hyperbole?
Notably, that still seems pretty insulting to me. jimbokun wants to have an honest discussion about the problem, using true data instead of emotional exaggeration. This is a reasonable thing to ask IMO, but of course it seems like an insult towards the person that's making stuff up.
What a naive position. People hate to pay taxes, the more they have to pay, the more they avoid it. Megacorps openly hiding money in fiscal paradises are the tip of the iceberg. Companies, and individuals, at every level, try to pay as little as possible, becoming as creative as the methods their wealth can unlock.
If billionaires (soon to be trillionaries) paid as much taxes as their wealth disparity compared to the middle class, a significant percent of the population would be exempt from taxes by the sheer insignificance of their contribution, and I don't mean only the poorest people.
Even with all that, top 1% of earners pay more than 40% of overall tax revenue in the US.
Now do the corresponding percentage of the wealth they hoover up.
(Plus, one of the tricks employed is to avoid earning actual taxable money. Steve Jobs famously had a $1 salary; folks like Musk now just borrow against their ever-rising shares. https://www.propublica.org/article/the-secret-irs-files-trov...)
> But take out a loan, and these days you’ll pay a single-digit interest rate and no tax; since loans must be paid back, the IRS doesn’t consider them income. Banks typically require collateral, but the wealthy have plenty of that.
The likes of Musk and Bezos are not earners though. They don't get a salary. They pay nothing in taxes as long as they don't cash out their wealth.
The whole reason for the use of "pay their fair share" while never actually defining what the fair share is supposed to be. It's solely about hit & run propaganda. Avoiding discussing actual numbers is a requirement to the politics.
This is a bad deal. Capital makes the marginal worker more productive, not less. You can tax the worker and she will still be better off than if you had taxed the capital, due to greater productivity. (This argument also applies to AI, of course. Since AI doesn't just instantly wipe out all jobs, there will be many workers that will benefit from it and will thus be quite able to fund their governments and social systems.) If you wish to tax some forms of "capital", or rather assets, you should focus on pure rent-generating assets like valuable urban land, or local exclusivity rights to parts of the EM spectrum.
> This is a bad deal. Capital makes the marginal worker more productive, not less.
Why should workers care about being more productive if they do not reap the rewards in terms of wages?
https://en.wikipedia.org/wiki/Decoupling_of_wages_from_produ...
Total compensation involves more than just wages. Providing benefits such as healthcare coverage is inherently expensive, since productivity gains in healthcare have been limited.
At least in the United States we are not getting this benefit.
If AI does begin to really crater the job market, only owners of AI (yes including shareholders) will benefit but most folks do not own stock - or at least do not own any significant amount of stock.
The point still remains, it's not like I get double the healthcare if I increase productivity.
A bad-faith argument.
Workers do not benefit in increased compensation of any sort when AI increases company productivity.
That's not such an ironclad argument lmao. If we are to believe Baumol's cost disease, rising productivity in other sectors is partly responsible for healthcare cost increase.
Obviously I don't seriously believe we should depress productivity so that nurses make less money and hospital stays are cheaper. But, you know, it doesn't make it untrue.
This concept has been thoroughly debunked. Wages and productivity track each other very very well.
That has not been true since the early 70s. Increases in productivity are multiples of the increase in wages since then.
World Economic Forum: https://www.weforum.org/stories/2020/11/productivity-workfor...
This is misinformation and has been debunked at length. The graph compares median wage to mean productivity which is nonsensical.
The people you are replying to are trying to have a meaningful discussion by providing references and some basic argumentation. Can you add some link or arguments that explain more strongly your point of view instead of using strong affirmations ('misinformation', 'debunked', 'nonsensical') without any trace of argumentation and no reference at all ?
I’d recommend reading my comment more carefully. The argument is pretty clear and straightforward.
Isn't that the whole point? That as total productivity has increased (represented by the mean), the wage increase has gone to the top.
That’s because most of the productivity increases come from the top as well.
Compare like to like. Mean productivity increase tracks mean wage increase super well, same for median productivity increase vs median wage increase.
It's not a matter of a "deal" to be made or agreed to, it's a matter of paying a fair share of the cost to organize a society. When Capital gets to reap dual benefits of revenue from business prospects and lobbying government directly to set the tax rules, then it can't ALSO offload outlaying to the public good that it DEPENDS on to make a profit.
Avoiding tax through various loopholes that Capital gets a seat at the table to help craft, while benefitting from externalizing the costs to taxing labor is just corruption.
Workers make capital productive.
If your argument were true we should set taxes on capital to zero, which is quite obviously a bad idea.
No, that's been a common proposal from economists pretty much since people started examining how economies work. Some places do have a capital gains tax of zero. Switzerland is one of them, and Switzerland is economically more successful than the rest of Europe.
Tax is one of those issues where there are actually correct and incorrect answers, thanks to many hundreds of years of active experimentation and relatively simple/robust theory. But people ignore the correct answers for social reasons.
The correct answer on tax is:
1. Figure out how much money the state needs to supply the services that are in-scope for it to an acceptable level of quality.
2. Aim to raise that much in taxes.
3. Optimize deadweight costs. That is, configure taxes to minimize the level to which the activities being taxed are discouraged and driven either out of existence or abroad.
If you do this sort of thing then you get Georgeism, you get zero capital gains, I think you get zero taxes on businesses, and a bunch of other policies I can't remember right now. The results can be economically very efficient i.e. they make everyone better off. However, almost nowhere uses them because there's nothing in the above three items about social engineering, and governments use taxation largely as a tool of social engineering. And in particular to please leftist voters who use the tax system to penalize wealth for its own sake, and to reward groups of client voters. Many governments also have a lot of trouble defining what's in scope for them and then working backwards to needed tax revenues; they prefer to raise as much tax as they can manage without totally crushing their economies and then find ways to spend it.
> Some places do have a capital gains tax of zero. Switzerland is one of them, and Switzerland is economically more successful than the rest of Europe. Tax
Switzerland is a bad example because they tax capital more directly. In the form of a wealth tax. https://en.wikipedia.org/wiki/Taxation_in_Switzerland#Wealth...
GP said setting taxes on capital to zero was a bad idea. Switzerland has only set capital gains taxes to zero. It still taxes capital.
I live in Switzerland. It's an excellent example of a place without a capital gains tax, because it doesn't have one. I didn't say it doesn't have other taxes!
The type of tax matters a lot. The reason capital gains taxes are bad is that they discourage investment, but investment is how you create wealth. "Creating wealth" is ultimately a synonym for creating material progress. Voters like progress, and so this is a very simple and direct argument, which is why most countries that have capital gains tax it at a lower rate than income. Wealth taxes have different incidence and change incentives in different ways. Basically, they discourage having wealth rather than creating it.
It can create its own problems. Switzerland has had big problems in the past with the wealth tax discouraging the creation of tech startups. The reason is that if you create a company then sell some equity in it to investors, that creates a valuation of your company which is then considered wealth, even though it's theoretical wealth and not liquid. In other words, doing a big VC raise can land the company founders with an unpayably massive tax bill: they literally don't have the money to send the government because it's only paper wealth.
To fix that the Swiss tax authorities had to introduce a new rule that says if you have ownership of a startup, this doesn't count towards the wealth tax. What exactly is a "startup" and what differentiates it from other kinds of business? Whether it is "innovative". What counts as innovative? The taxman decides. That means creating a startup in Switzerland is quite risky as if some random bureaucrat decides your product isn't truly innovative and you do a big VC raise you could be personally bankrupted (or you have to use some of the investors money to pay yourself out each year, which is then taxed as income too pushing you into a much higher tax bracket, etc). There are lots of other practical problems with the wealth tax.
Tax incidence is complicated!
In practice the Swiss approach works because:
- The wealth tax is quite low
- This "innovative startup" hack seems to work out in practice even if it's concerning in theory (tech startups aren't the only way to create a lot of wealth)
- Wealth taxes discourage all kinds of wealth equally, so the effects are diffuse and they don't specifically discourage e.g. getting promoted over company formation over inheritances, which is a distortion a lot of other approaches do create.
Let's summarize:
airstrike: zero taxes on capital are a bad idea
mike_hearn: Switzerland has no capital gains taxes and it's great.
triceratops: Ok but it still taxes capital.
mike_hearn: I live in Switzerland. No capital gains taxes are great and everywhere other than Switzerland has a lower tax rate for them than income because we want more capital gains. Also wealth taxes can cause startup founders to be taxed heavily.
There's a bit of a disconnect here. You're arguing against multiple strawmen IMO.
Outside Switzerland the current situation is: regular people pay high income taxes while they work, then somewhat lower capital gains taxes in retirement. Ultrawealthy people pay far less of both because they have ways to avoid them (keep employment income low, borrow against wealth instead of selling it).
In Switzerland, since the wealth is straight up taxed, even if at a lower rate (I ran the Swiss wealth tax numbers myself a while ago and you're right it really is a very small amount. I pay way more in capital gains taxes) there are fewer games. Everyone pays taxes on what they make or own.
The startup wealth tax problem has another solution: allow payment in non-voting startup shares, instead of liquid cash. The shares go into a sovereign wealth fund. The government either reaps a windfall eventually alongside the founder, or it misses out on tax revenue it shouldn't have collected anyway (if you look at it from the fairness point of view).
You're right, the origin of this thread was making an argument about all taxes on capital, not just capital gains. I missed that, I guess because nobody mentioned wealth taxes specifically and it's fairly rare for taxes on capital to mean anything other than capital gains tax. Mea culpa.
> The startup wealth tax problem has another solution: allow payment in non-voting startup shares, instead of liquid cash
This is an excellent idea! Did you come up with this yourself or have you heard of others proposing it?
I came up with it myself. It's possible there's prior art but nothing that I've read personally.
I don't think it's a particularly revolutionary idea because sovereign wealth funds already exist. Improving productivity means using less labor which means lower income tax revenues as time goes on (and that's what you want - higher productivity, fewer labor inputs).
And yet, the government needs revenue. What's growing? Wealth. Liquidating wealth to pay taxes is problematic. Hence the sovereign wealth fund. You can apply this to most forms of wealth - even publicly traded stock, real estate, crypto, and artwork.
I've proposed it on this site several times in the past.
No, it's a terrible idea, because the value of those shares isn't observable and therefore remains undefined until sold.
Why does it matter whether the value of the shares is observable every day, like a public stock? The value of the shares is quite defined at the time the tax is due. We know this because the government has a specific number in mind for valuation for tax purposes.
The shares are illiquid and that poses a problem for the taxpayer because the government only accepts cash. If instead they could sign over an equivalent number of shares then morally (and arithmetically), they've paid what they owed.
The government may subsequently choose to dispose of the shares on a secondary market, if one is available. Or it may hold on to the shares until there's a liquid, public market for them. Or it may never sell. It all depends on how the sovereign wealth fund is managed and structured. Way smarter and more knowledgeable people than me would have to design how the fund actually works and prevent market manipulation and insider trading.
Investment is not how you "create wealth". An actual worker somewhere performing their job is what creates wealth. Yet when that worker is paid for the wealth actually produce, we tax that heavily. So if you want to encourage productivity, regular income ought to be taxed higher than passive investment.
The argument for low capital tax is that if it's high, the people with the capital - who, crucially, need someone else to use it to make money from it - will just hoard it. For one thing, the obvious glaring issue with it is that however high the capital gains tax is, so long as the owner of capital in question still gets to pocket some of the wealth produced using it, they still have an incentive to continue - something is better than nothing. The actual, real world threat is that some other jurisdiction sets the tax rate lower than you will, and capital will then move there. But this same threat applies to many other taxes, capital gains aren't special in that regard.
This is the kind of semantic argument about words that makes anything other than flat personal taxation an endless rabbit hole.
When people talk about wealth creation they mean the creation of new wealth. Filling potholes isn't normally described as wealth creation because it's sustaining activity. You can choose to define wealth creation differently, that's fine, but it makes the term useless because it'd become synonymous with any kind of work.
Additionally, there's no real world difference between investors and workers. The idea you can separate capital as a class of people from workers is a Marxist concept that doesn't make any sense outside that broken ideological framework. The classical example: if someone owns a food stall, are they capital or a worker? If they pick up that stall and cart it to a bigger town down the road, is the act of them hauling their cart along the road work or an investment? You could argue equally well both ways, which makes the distinction just a distraction.
> however high the capital gains tax is so long as the owner of capital in question still gets to pocket some of the wealth produced using it, they still have an incentive to continue
Not at all! This is the kind of weird prediction that false distinctions between capitalists vs workers causes. It's why Marxist economies always fail. Investment is work and it also requires taking a lot of risk. If you confiscate 99% of someone's ROI nobody is going to say oh well, at least I got 1%. They're going to give up investing at all because the act of making the investment not only took effort, but also meant they could have lost the whole shebang.
If there was no difference between capital and labor, then capital gains and labor income would be taxed at the same rate. That's just the empirical argument. The theoretical is left as an exercise to the reader.
I feel like you have only a cursory understanding of finance, economics, and taxation. If you didn't, you would't ask questions such as
if someone owns a food stall, are they capital or a worker?
It reads like you're trying to find evidence that reinforces your priors while dismissing whole swaths of empirical and theoretical work that would immediately challenge it.
For context, I spent a decade as an M&A banker, so as far from a Marxist as one can be.
Isn't a wealth tax just an expanded capital gains tax?
If last year I had wealth X and this year I have wealth X+Y, I have to pay a wealth tax on the gains, in addition to the the tax on the amount I had previously.
So my gains are still taxed.
The big differences are:
- Wealth tax is much lower, think a percent of your wealth or less vs 20% of your gains.
- You can avoid wealth tax by spending. If you sell a bunch of shares to earn $100k then take a year off to see the world, you pay no tax on that (other than sales taxes etc).
- In practice a lot of things aren't covered by wealth tax. If you spend on a fancy new TV it's not measured. Only the big ticket items are wealth taxed (houses, financial assets, art, cash piles, etc).
The Switzerland model is unique in several ways, both in its history, which cannot be replicated, and in embracing of...questionable financial services.
It's unclear that the model can be replicated generally, let alone whether it should. Importantly, there may not be sufficient demand for banking services like the Swiss provide.
Your three step plan says nothing about how much should be taxed at the personal vs corporate income level, or on the gap between capital gains and labor income taxes.
I'm not arguing for higher tax revenue overall. I don't believe in that, but I also wouldn't even need to make the argument even if I believed in it.
The simpler, more defensible argument is that taxes on capital gains must be much closer to income taxes. Historically they were, even in the US, and we seemed to be fine.
The idea Switzerland's economy is dodgy or dependent on banking is an urban legend. Only 10% of Swiss GDP comes from finance at all and that includes everything, including insurance and pensions. Private banking is only a fraction of that, and private banking with anonymous accounts - which is what people tend to mean by this - was a tiny fraction of that again.
Meanwhile, financial privacy isn't inherently questionable. The USA did a big push in the 1970s to strip privacy from the financial system which until that point had been the default. That was the birth of the concept of money laundering, created as part of the war on drugs. The approach failed as drug cartels found ways to launder money cheaply enough that it wasn't a big friction for them (normal estimate, it adds ~10% to their costs). Not everyone thought that was a great tradeoff, and the Swiss numbered accounts had been used by people trying to hide from the Nazis.
At any rate, the USA forced their concept of anti-money laundering on the world (not that most countries needed the arm twisting) and Switzerland has implemented exactly the same policies as everywhere else for decades. It has no special rules with respect to banking for a long time now.
> Your three step plan says nothing about how much should be taxed at the personal vs corporate income level
It's a set of principles for answering those questions, not the full set of answers.
It's been years since I looked at this but IIRC the general agreement is that you shouldn't bother with corporate/business taxes, because they're both an indirect/inefficient way to collect tax (all taxes are paid by people in the end), and easily avoided.
It was for this reason that the designers of the EU's taxation system originally configured corporate taxation to be collected wherever the nameplate was (i.e. an arbitrary location chosen by the company). The assumption was that with time individual countries would compete the corporate tax rate to zero, fixing the underlying inefficiencies. Of course what's actually happened is some of the countries try to gang up on the others to try and force them to stop lowering taxes. It's not a stable outcome, politically.
In practice business taxes are popular because politicians view them as a way to tax citizens of foreign countries. That has bad effects too but schools either don't teach economics or don't teach it properly in most places, so there are lots of weird hacks like this where something that creates more harm than the alternative gets preferred because people can't resolve the harm to the root cause.
An ideal LVT would tax the full economic rent of the land, but that's unlikely to happen. We don't want to overshoot 100% because that would cause land abandonment.
So in theory, LVT could collect more tax than the state needs to fund services. If that happen, it would be distributed as a Citizen's Dividend.
I am skeptical that we wouldn't be able to find a productive use for government spending, but that's a discussion for citizens of a Georgist state to have.
Also, Georgist policies would discourage the existence billionaires and other people with extreme wealth simply because a lot of their wealth came out of economic rent.
I never understood this Georgist argument. The richest people in the world today require very little land. Remote working is easily possible and plenty of companies use it, even if managers don't always like it. This feels like a medieval perspective.
Georgists aren't frozen in time, nor had they ever been limited to just taxing "land". We consider any economic "land" fair game. We even discussed network effects that allow companies like instagram retain a monopoly.
In any case, California are where some of the most powerful tech monopoly are located, and not coincidentally it's also where some of the most expensive land there is.
So you define land to include stuff like copyrights and patents too? What counts as economic land?
Just my opinion as a Georgist amongst many, I would categorize copyright and patents as non-reproducible privilege rather than economic land though non-reproducible privilege also describes private ownership of land. It's very clear that it's artificial, as ideas do not suffer from the exclusivity problem that comes with owning physical land. What IP has in common with owning land is the extraction of economic rent.
Economic land is anything that's fixed, finite, and not man-made, such as land, the electromagnetic spectrum, and orbitals.
Services like amazon and instagram are something of a puzzle to Georgists, but it's at least clear that Amazon and instagram benefits from labor and effort of the platform users. Without people selling on Amazon, there's no amazon. Without users, there's no reasons to be on instagram. To be perfectly clear, platform companies obviously put in labor to build their services, but the network effect isn't entirely of their own making.
In the US we just cut taxes, increase spending, and borrow the deficit without a thought to how to pay it back.
I’m not sure why all these economists bother arguing theory when obviously they should just go to you for the solutions. It’s all so simple afterall.
Please don't cross into personal attack, regardless of how wrong someone is or you feel they are.
You're welcome to make your substantive points thoughtfully.
https://news.ycombinator.com/newsguidelines.html
How much debate about this stuff still happens, outside of academics who need to publish or perish? From a quick check the only papers being published on this stuff are all variants of "if we add another variable <X> to some model we can conclude the difference in tax incidence is <Y>" where Y is some minor variant of pre-existing beliefs that may or may not hold in reality. Outside of that there are occasional flareups caused by old-guard left wing politicians or activists getting into fights about it with economists, and not much else.
A lot of the debate on this topic is tedious anyway because it revolves around semantic distinctions that only exist in specific kinds of ideological discourse.
If their argument were true we should set them as far negative as possible - we should tax 100% of labour and give all that money to capital owners. Which is kind of something that's already happening.
> Capital makes the marginal worker more productive, not less. You can tax the worker and she will still be better off than if you had taxed the capital, due to greater productivity.
Point one: higher productivity is not necessarily our goal. I could think of numerous industries that would make the world better if they did less work.
Point two: There's a moral absurdity in taxing the wages earned by labor more heavily than the returns earned by ownership. One is tangible effort, the other is an abstraction backed by law. If anything, taxing capital should be the baseline, because it's the least tied to survival. Historically, when America was at its most broadly prosperous, capital gains and corporate profits were taxed at far higher rates than today.
Point three: AI intensifies that calculus. If AI is deployed by capital to further replace or devalue labor, then taxing only the worker is punishing the displaced while rewarding the displacer. That's pure extraction. If we want social systems to survive, the burden has to fall on the owners of the machines, not the people being replaced by them.
Genuinely one of the largest and most destructive ills of our society right now is that so tremendously more of our shared prosperity as a system is directed to those who do the least to create it.
It's both. You don't want to tax capital and income. VAT and sale tax are a bad idea too, especially since they're regressive.
So, what do you tax? You tax land and land-like things, non-reproducible privileges(like patents and copyright), pollution and other negative externality.
Now, there's an argument to be made that we couldn't possibly be able to fund governments on the back of these taxes. Fair enough, but it should mean we minimize those taxes until the economy grows enough to fund government services.
You don't want to tax pollution and other negative externalities to raise revenue though.
> You can tax the worker and she will still be better off than if you had taxed the capital, due to greater productivity.
This assumes the worker is the one benefiting from the productivity gains. We're just worked more and we don't get the added value.
> The fact that capital owners successfully avoid contributing to the financing of our states and social systems is
Are you sure capital owners do not contribute to our states and financial systems?
For instance, Jeff Bezos is worth $238 billion even though Amazon has a $2.6 trillion market cap. That's $2.4 trillion of value created for other shareholders plus trillions more for employees, customers, suppliers, governments, and other stakeholders.
Jensen Huang is worth $164 billion while NVIDIA’s market cap is $5 trillion. That’s $4.8 trillion of value for other people (ignoring value created for non-equity stakeholders).
etc.
I'm not saying that there should not ALSO be other ways to force contribution (e.g. via taxes), but to say they do not contribute at all is false.
You are assuming:
1. Value created for other shareholders is a good thing
2. $ "value" directly translates to actual resources or services
3. These employees and customers would not get the same or more value elsewhere if Amazon did not exist
4. This "value" created by Amazon is better compared to the alternative (such as more resources used locally instead of global trade)
Well, you are assuming there is a central benevolent dictator who can compute "Value" more accurately than millions of people collectively voting with their wallets.
If AGI is actually attainable, then, sure, planned economies will be more performant than market economies, especially for high value industrial captal equipment. No need for Gosplan to decide on your candy bars and craft breweries.
> If AGI is actually attainable, then, sure, planned economies will be more performant than market economies
What is the logic?
A market economy is a distributed compute engine. The main reason why planned economies do worse historically is because the amount of compute needed to actually account for everything centrally is so immense (and thus costly), the implementers necessarily have to adopt some kind of simplified model, and then you get divergence between what the plan says and what's actually happening.
It's not a given that this will remain true forever, although I don't think it's tied to AGI. One could argue that AGI push is the trigger for a massive increase in compute capacity and corresponding decrease in price that might make this kind of thing viable, but that's just wishful thinking, not a fact.
Most of the definitions I've heard of AGI are that it outperforms humans at complex professional tasks. That would include capital allocation.
Capital allocation is not an IQ problem with only one correct solution that can be made only with hard data.
Not to speak for the other poster but I didn't see any implication of a central benevolent dictator in their comment.
It's implicit. Amazon has billions of dollars because customers freely handed over the money. We know they found the service valuable because they wouldn't have done so otherwise.
The poster is suggesting there is some _true_ value separate from what these customers who know their own situations best think. That they are secretly being fleeced and a central planner will somehow better allocate the resources.
>It's implicit
Not at all. What if it were an employee co-op?
"The ultra-wealthy should have less power" != "We should implement a five-year plan for our command economy as thought up by glorious and correct Party."
If I run around town smashing windows with a rock, GDP goes up. Computing value more accurately than financial markets is not difficult: the bar is on the floor.
If I run around town smashing windows with a rock, GDP goes up.
Not generally. Window repairmen get higher incomes, but the rest of the economy has less consumption and investment.
> If I run around town smashing windows with a rock, GDP goes up.
I don't believe that's true. I believe that's called the "Broken Window Fallacy" in Economics.
Breaking windows DOES increase GDP, just like the parent said. The argument ( https://en.wikipedia.org/wiki/Parable_of_the_broken_window ) only argues that not all GDP increase is good, because of waste of resources, because of the opportunity cost. That's why measuring success only by GDP is a bad idea.
One thing to point out that is lost in these arguments of “they create value for the shareholders”.
Folks that own a vast amount of stock do not pay taxes on that stock. They own the shares, and they take out loans against those shares. At some point they rollover or pay off those loans by selling some shares, but the shares have increased in value significantly in that time, or they’ve been granted new shares.
When we say “<business> has created value for shareholders”, it’s said in a way that implies that somehow that wealth creation makes its way into the tax system by virtue of the fact the wealth was ‘created’. It does not.
First, taxes still get paid when the individual dies as estate tax. Second, increased shareholder value typically means more corporate profit which is also taxed. Third, dividends are taxed. So your claim that the shareholder value never makes its way into the tax system is plainly false.
This is all aside from the fact that increased shareholder value means a more abundance society regardless of the increase in taxes. We could quibble over the exact distribution of who gains from the enlarged pie but it's certainly not the case the 100% of it goes to capitalists so consumers and employees also benefit.
> taxes still get paid when the individual dies as estate tax
Almost no one in the US pays the estate tax. It only applies to estates over $14MM and most large estates get reorganized into trusts with estate tax avoidance as a primary motive.
> That's $2.4 trillion of value created for other shareholders plus trillions more for employees, customers, suppliers, governments, and other stakeholders.
That's not Bezos' doing alone, that's Bezos plus over a million workers that did that. If Bezos never existed in history, someone else would have filled in that market. We need to stop this myth that a few men alone create all this value and that without them we'd still be dragging plows through the mud for our farms.
This is a two-edged discussion. On one extreme, there’s an interesting Marxist idea that value creation is largely the product of historical and social forces, not just individual effort. However, I don’t think it’s fair to single out AI, or any billionaire to fit that narrative while ignoring other factors, such as the idea that nations should not exist since they can be thought in the same terms.
On the other side, Jeff Bezos is clearly an outlier. Even if we agree that ecommerce would have existed without him, we don’t know whether someone else would have created the same scale of value.
Neither do we know if things would have turned out better without him.
But we know that there are few winners and past competitors like eBay faded out. It is more extreme with Microsoft: they have survived more market shifts than anybody else, there is no doubt they have something special and at that business level it is difficult to argue that competitors have not tried everything, and the idea of good and bad behaviors is naive at that level. For example, a "good" company such as Sun Microsystems was involved in bribes to gain markets.
I would say they dont contribute. I don't think Jeff Bezos has contributed anything positive, at all. He's managed to become insanely rich in a system that rewards bad behavior, so what? All that value isnt doing anything.
Are you saying Amazon isn't a positive? Or that Bezos didn't contribute to making Amazon what it is?
I think it's pretty clear Amazon is quite a positive given by how many people like using it so much for it's convenient 1-stop shop, quick shipping, and hassle-free return process.
Are you saying it would be better to have to shop at 1000 different little websites with probably crappy or at least inconsistent return processes?
People would be more likely to shop in their local stores, buy local products, and sustain the local economy.
OK but how realistic is that? Not everyone lives in a city nearby local stores.
There is such a wide variety of products that people go to Amazon for. I know I do. So many things are niche I can't see how any local stores could exist to stock things like that in even a 1 hour range from a majority of the population.
How many people are going to drive hours to go to a special boutique that has this random thing they want or need?
Maybe people use Amazon to buy routine things that could easily be stocked locally. But I guess I use Amazon to get things that I can't really get or even usually find anywhere else for that matter. Most come from small operations using Amazon as their sales platform. Amazon is providing a lot of discoverability and logistics to them and I am not sure I would even stumble across the seller if I had to find some tiny website that they operated themselves.
I am not sure most people would prefer to shop locally, most people don't seem to even go to the store anymore and instead use delivery services for everything. This saves so much time to allow us to do other things that we enjoy in our lives. I don't think small shops would be able to offer this level of convenience.
> OK but how realistic is that? Not everyone lives in a city nearby local stores.
Are you serious? I live in country where we are not using Amazon.
And you don’t have another big online marketplace that’s basically similar?
And if not, you are saying you have a similar availability of such a vast network of goods, almost anything you might want and the convenience of fast delivery and simple returns via local shops or something?
I guess I’m not sure what you are suggesting. I personally find that shopping and finding and acquiring the products I want is vastly more convenient and easier with Amazon than before we had Amazon and yes I was around back then too. I’d never want to go back personally. Most family and friend I know seem to feel the same.
Absolutely. Creating value in the stock market is not the same thing as creating value for society. Are we really better off as a society now that amazon has closed down all the mom & pop stores? Are we really better off as a society now that the entire internet is centralized around AWS? It made a lot of people rich, but the internet sucks more than ever
It’s much easier to tax the general population than businesses, as they don’t push back as much.
It’s the same pattern everywhere around the world (perhaps there are a few exceptions). Businesses can be much more creative with tax evasion as well.
> It’s much easier to tax the general population than businesses, as they don’t push back as much.
Businesses don't pay taxes. People do. Every dime that a corporation pays is a reduction of capital returns to shareholders, or a reduction of investment into business activity, both of which are taxed again by the people who ultimately receive the capital.
Yep, concentration of wealth leads to a smaller group of people that buy their way out of taxation leading to further concentration of wealth and services falling apart for the masses.
Businesses can play the game where they shop around various municipalities and get them in a race-to-the-bottom on tax breaks if they move their business to their community.
The fundamental problem of our time is that even capital in the form of bricks makes more money than most kinds of labor.
I was mind blown when i found that this is a major investment thesis in argentina.
Argentina is a special case.
When inflation is absurdly high like in Argentina, Economy does not make sense any more.
Basic economic assumption are not true and you get things like that or that "spending" is actually "saving".
I don't think it relates.
That is the opposite of a problem - it emerges because we have tools that make things more efficient than just throwing toiling bodies at it. We had economies which were based upon it, it was called slavery. Capital compounding its gains through better capital is how we get progress. The presense or absense of the capital advantage is part of what separates third world wages from first world.
The industrial era problem isn't capital but that economies of scale encourage consolidation heavily and make running small business an even more uphill battle. There is at least a counterbalancing force of competitive pressure and antitrust to promote some splitting for innovation's sake as opposed to just one big stagnant monopoly winning out just because it is biggest.
The top 1% of earners in the US pay 40% of all income taxes.
https://usafacts.org/articles/who-pays-the-most-income-tax/
This covers federal income taxes only, excluding payroll taxes such as Social Security and Medicare. Including those the top 1% pays ~25% of all federal taxes while earning ~22% of all income.
Top 1% have more income (income inequality is a thing). Taking away 40% income would hit the bottom 99% much harder than it would affect the life of top 1%. 50% of renters spend >30% on housing, 25% spend >50%.
40% figure is also based on individual income taxes. It drops significantly if you consider other sources (payroll etc).
Top 1% also receive preferential tax treatment and benefits disproportionately from policy changes.
The top 1% of earners aren't the capital owners, not even close.
This isn't about income.
What is it about if not income?
Income is what you earn from your labor (the things robots will do in the future). Capital is setting money to make more money (e.g., by buying robots to get rid of labor that earns income).
Capital ≠ income
You're missing the point. The effective tax rate of many billionaires is lower than ours. "Musk with a fortune of $244 billion, paid an average effective tax rate of 24% from 2018 to 2020". In other years it was as low as 3%[2].
[1] https://www.cbsnews.com/news/income-taxes-billionaire-tax-ra...
[2] https://www.propublica.org/article/the-secret-irs-files-trov...
I could not agree more.
Another fundamental problem is that the means of production are concentrated into the hands of a few.
Are they though? At least for AI/software the last 30 years were fantastic to have universal access to means of production (compilers, tools, operating systems, models, you name it).
I am more worried about the capability of people to use the free means of production (more precisely improve education) rather than the concentration.
Edit: and to remove any doubt, I do agree that taxation of capital is completely badly done now, but I do not think the capital is about owning the means of production but about the capital (effort) required to organize people to use the (mostly) free means of production.
There are more things in this world than software. Many of them are important!
Interesting discussion concerning this on Prof G at around 35 minutes.
https://www.youtube.com/watch?v=EklEzXBQP9U&t=1353s
> The fact that capital owners successfully avoid contributing to the financing of our states and social systems
The top 1% pay 40% of the Federal income tax.
The top 1% arent the problem. The top <=0.001% are the problem.
The problem is the amount of government spending, which will never be enough.
I argue there is a more fundamental problem with the money: Debasement.
Debasement is an invisible tax and its effects far outweigh individuals bypassing taxes.
... which is a different topic.
This thread is about the fair taxation of AI, if any.
The fact that people think, capital owners who actually provide employment and produce useful things and do better the better they serve the consumer even when their motives aren’t altruistic (and when they are altruistic it is even better) should be taxed more so the giant government corporation can make bureaucrats pockets fatter and waste a bunch of money doing inefficient things is more of a fundamental problem.
Capital owners don't produce useful things. Their workers do.
And so you can easily turn that argument around: the workers who actually produce the useful things are, for some reason, taxed higher than the owner who didn't lift a finger to produce anything, but is entitled to all the profits by virtue of being the capital owner.
I was so with you the first half of that. But the notion that everything should be capitalism is just as wrong as the notion that nothing should be capitalism (or, that capitalism only leads to bad things; obviously wrong but somehow a broadly accepted truism).
Capitalism works when a market works; capitalism fails when a market fails. Healthcare is a great example, because there’s an obvious and inherent imbalance in demand vs supply. Firefighting is another great example. These also have externalities to the community as a whole that everyone gets, even when you don’t pay/need the service; so it makes sense to make everyone pay (taxes). Even if you never have a child, even if you send your kids to private school, you live in a society that could only exist because of a (formerly, relatively) high standard of public education. So everyone pays for schools.
The idea of government bureaucrats lining their pockets is also (formerly, relatively) ridiculous: who would get into US government bureaucracy to make money? They are all (formerly, relatively) doing it almost uniformly because they believe in the mission, because they would almost all make more money going private.
i haven’t had my coffee yet, but i’m going to need to see this sentence diagrammed out.
> The fact that capital owners successfully avoid contributing to the financing of our states and social systems is, in my view, one of the fundamental problems of our time.
Are you talking about taxing unrealized capital gains?
Because for the situation where capital is directly replacing labor, the income generation is taxed regardless of the whether it’s generated by a human or machine.
If I hire people to make and sell hot dogs, they pay taxes on their wages. If I build an automated hot dog vending machine, I still pay taxes on the profits of selling those same hot dogs.
One can’t spend any of the money until it becomes personal assets. So what is not being taxed?
If I keep them in the company, I pay corporate tax on profits (22%) for retained earnings. And then I’d have to pay dividend tax (either 15% or 20%) atop those retained earnings to pay them out to myself as income. Or I pay myself a salary and pay regular income tax on the full amount.
Due to our progressive tax brackets and double taxation of dividends, both options end up with larger tax rates than when dealing purely with low wage human labor. We as a society collect more in taxes from one high income earner than multiple low income ones.
> One can’t spend any of the money until it becomes personal assets.
The oldest trick in the book is to use unrealized gains as collateral for loans - we even have banks specializing in this.
Oh, and the US has a law that erases the tax bill for dead people - you'd be stupid not to use this trick.
That defers the gains, but does not eliminate them. When the loan comes due, they have to sell assets to pay it back.
>the US has a law that erases the tax bill for dead people
That is true, but there is a theory, applied very weakly, that supports this. The idea is that a decedent's estate is subject to a wealth tax on its fair market value, therefore to also subject the unrealized gains within the estate to income tax would be double taxation, which is to be avoided. The flaw is that the exemption from the estate tax is relatively high (something like $13,000K), so there would not be any double taxation is most cases, but it's treated that way nonetheless.
It does not make sense.
One inherits free money - and pay inheritance tax of it. In order for capital to be free, capital gains tax needs to be paid.
And the general idea to protect against "double taxation" is meaningless. All money are constantly being taxed again and again.
Regardless. Inequality in itself is really bad, and Americans do feel the consequences.
Would you also be open to paying taxes in your 401k yearly based on unrealized gains?
In the country I live the 401k equivalent is taxed yearly on gains (and again as income when I retire), and I think that is fine - I get a world class society in return (you guessed right, it is a Nordic country)
so the answer is yes.
However, i did not go as far as proposing anything. You are assigning value on my statement.
I merely pointed out that it is a mute point to say that you can not use your unrealized gains.
When those unrealized gains are spread across 10s-100s of millions of people it's fine because statistically gains are always being realized. As those holdings get further concentrated that stops happening.
If I take out loans against those unrealized gains? Hell yes.
Absolutely, as long as billionaires, hedge funds, and vcs are also paying a progressive tax rate on their shares and holdings.
Of course, as long as the tax is progressive. Custodians of assets almost all charge an annual feel on unrealised gains, it’s hardly a foreign concept…
We should do what the moslems do. 2.5% wealth tax on everybody above a minimal wealth threshold!
Is there any time in human history where this wasn't the case? Genuinely curious.
After world war 2, most of the western world had wealth taxes. The US had eg. >90% income taxes, and death taxes of up to 77% on inherited wealth.
You know, exactly that span of time that everyone agrees on being really prosperous.
In essence...
Tax not paid by ultra wealthy goes back into he system as loans that extract interest that in turn is used to buy assets sold to pay for interest, those are then rented back to the system to extract more interest.
In essence by allowing no tax to be paid by the ultra wealthy, we facilitate the death of the middle class and transfer of everything to the very few - with mathematical precision.
Ultimately we need to ask ourselves why we have a society, what's it's purpose.
For the few or the many ?
While I probably prefer a society that is more "for the many", I can't exclude the possibility that some people have different preferences and would not want to impose my opinion.
Considering this, everybody might have to make (at some point in their lives) hard choices regarding where they choose to live. Yes, one should fight to improve the society one is living in, but there is also a saying "only the fool persists in their folly" ...
What's crazy is that productivity per employee just keeps increasing year after year, but successive neoliberal governments continue to lower corporate taxes. They should be doing the exact opposite! Taxes should be raised as productivity increases! AI is just one more tool that gradually increases productivity, among others.
Why should productivity and corporate tax rates be correlated at all, up or down? The link there is not obvious.
Insofar as productivity is a sign of the system getting imbalanced towards capital, the system should be pushed back and the everyman thrown a bone.
To what extent is productivity a sign of the system getting imbalanced towards capital? That relationship is not at all clear to me.
It has a finger on the long term trend of decreasing relevance for labor and increasing relevance for capital as factors of production, but it's certainly not a metric I'd choose and that's why I tried so hard to steer towards something better.
One can imagine a world where productivity increases, the need for old jobs is reduced, but newer, better jobs more than replace them because the economy is experiencing genuine growth. Self-serving capital rhetoric will push you to always imagine it this way, self-serving labor rhetoric will push you to never imagine it this way, but good policy lies in figuring out what's actually happening in aggregate and responding accordingly (the framing I tried to push).
If productivity is increasing but not average salary, then by definition the additional wealth is being taken by the owners of capital.
No it’s not. If the increased productivity is realized by multiple industries, then they all compete on price and the price of their goods comes down. That means the consumers of the product capture the gains in productivity.
Farmers using machinery instead of labor has meant cheaper food for everyone, not rich farmers.
This is possible in theory.
I think that if we look at inflation-adjusted productivity, and inflation-adjusted average income, then that would indeed prove increasing inequality, right?
I believe the chart in this link is adjusted by inflation. Showing overall the same trend:
https://www.epi.org/productivity-pay-gap/
Right, because governments do anti-trust and ensure fair competition. We all agree.
When your argument boils down to discussing fantasies in a fantasy world, you have a bright future as an economist indeed.
It's not productivity itself; it's the decoupling of productivity from wages. If I'm creating 3 times as much value as my equivalent in 1970, why aren't I getting paid 3 times as much inflation-adjusted money, hmm? It's not even unfair to shareholders - they'd also get 3 times as much as in 1970. But instead they get 10 times as much and I get 0.7 times as much, or something like that. What's the deal?
Ok, but that’s not what the post I replied to was saying.
> If I'm creating 3 times as much value as my equivalent in 1970, why aren't I getting paid 3 times as much inflation-adjusted money, hmm?
Because that increase in productivity comes almost entirely from technology owned by your employer.
To look at it in a contrived example, let's take textiles. There is a textile factory employing weavers who weave fabric by hand, and the factory owners buys a new automated weaving machine that makes the weavers each 3 times more productive. The maker of the machine created the technology, and is paid for it, the owner of the factory made the investment to bring the technology, and profits from it.
This is basically exactly what has happened to modern productivity.
Except in technology where the gains come from my personal investment in skills. I'm spending hours every week keeping up with the field of software engineering. I've been investing in learning my craft since I was 14 or so.
I'd argue the same goes for many types of digital creators, artists, video editors, animators, and so forth.
> Except in technology where the gains come from my personal investment in skills.
Not really. That's essentially a weaver learning to use the new automated weaving machine. That is what you do to remain qualified for the job. Now, if you were a framework or key system creator, building the underlying platforms that get adopted throughout the industry, I would agree. But just learning to use the tooling the the industry creates isn't that different, other than the rate of change you have to keep up with.
A weaver who knows how to use an automated weaving machine produces 3 times as much cloth as one who doesn't, so why don't they get paid 3 times as much? This is the problem of the decoupling of productivity and wages. It started happening at precisely the moment the gold standard was ended - weird.
> A weaver who knows how to use an automated weaving machine produces 3 times as much cloth as one who doesn't, so why don't they get paid 3 times as much?
An automatic weaving machine, operated by a capable operator, produces 3 times as much as a manual weaver. The productivity increase is the machine, not the operator. That's my entire point.
The owner of the machine reaps the surplus, not its operator.
> This is the problem of the decoupling of productivity and wages. It started happening at precisely the moment the gold standard was ended - weird.
You'll get no argument from me about the ills caused by the financialization of the economy, but I don't think that's what's going on here.
If productivity increases, margins increase. When margins increase any business in a competitive environment will have to lower its prices in response to any other business lowering prices that got those automation gains.
Productivity increases result in lower prices in any competitive market.
* competitive
> but successive neoliberal governments continue to lower corporate taxes.
By itself it wouldn't be a problem, the problem is at the same time they raise taxes for people doing OK, and salaries are mostly stagnating.
True, but good luck getting people to vote for their own interests. It's not hard to fix this. It really isn't. But it's nearly impossible to get through to people. As someone else said, at some point you have to make a choice about where you want to live and do what it takes to get to that place before you drown in the sea of marching morons.
If AI really is just another capital amplifier, then the problem isn't new, AI just makes the existing imbalance harder to ignore
It's the ultimate capital amplifier. The end goal - AGI - essentially means the ability to derive wealth from capital directly, without any pesky middlemen such as laborers who need to be paid. The endgame is capital without labor.
But, of course, in such a society, the people who don't own the robots - i.e. most of us - become "economically unnecessary".
It removes a layer of abstraction from capital to production. With AI the only question is if the compute is available to purchase, once it is, you can produce with it.
Of course, the question then is who is consuming the production, but we're not quite there yet.
Most of the capital is owned (through pension funds and then different investment funds) by completely ordinary people who put their completely ordinary savings into it and get completely ordinary pensions out of it.
So you are effectively suggesting to forcibly take their money from them and then give it back, but through a corrupt and bureaucratic system of the state.
of all* time.
there is hope for HN!!!
> The fact that capital owners successfully avoid contributing to the financing of our states and social systems is, in my view, one of the fundamental problems of our time.
So the government is going to fix this, right? Right...?
Most governments in the world exist to protect the interests of capital owners. Which makes sense - the creation of states in the first place was an act of, shall we say, radical capital acquisition.
Yes by having the Federal Reserve print more money!
And it makes the governments that have been allowing this more a part of organized crime than of anything else. It's unmitigated corruption.
I'm all for raising taxes is on the rich but the government is extremely fiscally irresponsible.
The current interest on our national debt is greater than our military spending.
So if you increase taxes some people think it would just be throwing it into the money fire of Washington.
There needs to be a lot of changes in D.C.: term limits in congress, citizens united needs to be repealed, erc etc
The government is fiscally irresponsible fundamentally because the rich have successfully lobbied to prevent taxes from being collectible in sufficient quantity to balance the budget. Once you're at the point where the gap cannot politically be closed - "responsible" budgeting is just an exercise in posturing and lobbying exercises.
> The current interest on our national debt is greater than our military spending.
For quite some time, my mortgage interest was larger than my principal.
That didn’t make it fiscally irresponsible.
Economists currently cannot find a solution, even with computer assistance, to our economy.
https://www.marketplace.org/story/2025/07/14/how-our-debt-cr...
That’s pretty standard for economists.
It's crazy how in 1992 the US federal deficit was 4% of GDP
During Clintons term this turned around to being a 2.3% surplus in 2000. Just 25 years ago the US was spending less than it was taking in tax.
The Bush came in and that surplus became a 3.3% deficit by 2003, and then the GFC crashed it to 9.8%.
While Obama was in, it crawled back from 9.8% deficit to 3.1% by 2016 - same value as before the GFC
Since then it's gone back to 6% of GDP
https://fred.stlouisfed.org/series/FYFSGDA188S
Are you telling us that the party of golden ballrooms... err.. fiscal responsibility is not actually being fiscally responsible?
You tell me. It's not like the other party is doing better. California is posting a $18 billion deficit next year, despite the highest taxes in the country, and despite record tax revenue from the AI boom.
They had a $97.5 billion surplus in 2022. Seems like they're doing better overall than the Feds?
Even the $18B ($450/capita) vs $1.8T ($5,300/capita) looks pretty small for a state that large.
When Trump did the whole tax cut thing in 2017, it massively blew up the national debt. This is because the rich got massive tax cuts.
The government is fiscally irresponsible by design, because the government is ran by the plutocrats with all the incentives to give themselves more money at the cost of everyone else.
Americans love thinking they are temporarily depressed millionaires and one day those tax cuts for the rich will matter for them.
It's hard to truly comprehend the damage Red Scare did to all of our collective lives. The Post-WW2 era utterly destroyed the labor movement and pretty much any form of collective action. And all but about 10,000 people are worse off for it.
So many commnents here, yours included, make perfect sense when you simply look at them through the lens of the workers' relationship to the means of production.
Automation could be a good thing. It could mean we need to do less work and have more leisure time. Instead it gets concentrated in the hands of very few so they can become even wealthier. And the resultant layoffs are used to extract free labor from the people who remain and suppress their wages, all to eke out more profits.
I find it ironic that individual income tax is a thing in USA, but as soon as AI does the work, oh only the owner has to pay.
As a libertarian, I find the whole requirement for workers to secure an accountant and file individual income taxes under threat of retaliation silly. Individuals should be free to engage in activities like working for an employer, taking care of their kids or aging parents, or having sex, without paying tax to the government. Taxes should be levied on companies and robots, not humans doing everyday things.
The employer knows exactly how much they are paying each employee, and they already have accountants on staff. Why create "bullshit jobs" just for employees to file this same exact information again?
So yeah, we shouldn't wait for AI to replace workers, to abolish the individual income tax for individuals. It should have been done a long time ago. Employers can pay the tax (as they do with FICA). And in fact, we're going to have to have a tax regime that taxes robots, which would become the primary economic actors soon anyway. If corporations can have legal personhood, surely robots can too LMAO.
>Taxes should be levied on companies and robots, not humans doing everyday things.
This is also a slippery slope. As slippery as taxing individuals, property etc.
You can’t ask someone to pay taxes if they have a bigger, cheaper army.
I wouldn't discount the collective power and ingenuity of a few billion oppressed people.
Looking back at the degrading lives commoners have suffered throughout a lot of human history, I'm pretty split. And that was before rulers had AI and autonomous defenses to keep everyone in line. Frankly, I think this exact line of thought is what's pushing a lot of AI investment right now.
I share your concerns, but also I don't think this analogy is very close. Historically the reason why commoners could be kept oppressed is because the relative amount of "firepower" available to individuals was fairly small to begin with, and easy to regulate. Many places banned military weapons like swords for the commoners, for example, precisely so that they couldn't quickly form a militia capable of challenging their feudal lord's retinue. I don't think that's possible in the modern world, though, because even with heavy regulation of arms, the stuff that's readily available (or can be put together from things that are readily available) is already too destructive to contain.
The modern rulers rely more on brainwashing and less on direct oppression for this exact reason. Not that the latter doesn't happen, mind you, but I also can't think of any modern day regime that is sustained solely by force, without some measure of popular support.
It just took some guns to conquer South America. Flying drones with AI targeting will be too much for regular people. The rich will have access to this service.
Give unto Caesar that which is his, and let God handle the rest. The base case for the inductive proof is alarming, and I can’t see it ending well.
A bit of a tangent, but the more complete reason depends on what civilization (Aztecs/Incas), the common factor is an extreme loss of life due to old world disease.
Additionally, for the projectile velocity at the time the gambeson-like garment the Aztecs had available was surprisingly effective.
The top 1% already pays more than 40% of all federal income tax at a 26.09% effective rate. The bottom 50% has an effective rate of 3.7% and contributes only 3% of all tax revenues.
https://taxfoundation.org/data/all/federal/latest-federal-in...
How about the rich say that 50% of the economy should pay their fair share?
> income tax
They don't get money through income! They get most of it through capital gains or unrealized capital gains which are taxed at special low rates and zero rates respectively.
It's transparently self-serving and completely indefensible -- though I'm sure you'll try.
Capital gains taxes are applied to capital gains income and are included in the stats above.
If we limited individual wealth to $999 million--just outright capped it, and enforced that--it would not impact these people in the slightest.
What it would impact is how easily these people could influence the political system and get themselves out of trouble.
At $400 billion net worth, Elon Musk could retire one hundred thousand times. He literally wrote multi-million dollar checks to various politicians and ran an illegal pay-for-votes scheme in Pennsylvania. And he'll face zero consequences for it.
But what do you do with tesla/amazon/etc. then? Force elon to sell of his shares? Take them? What if the price drops? Give the shares back?
It's not like he has all that in money in his bank account, it's ownership of companies, their value is not real until someone else is willing to pay.
The tax is his shares, those shares become public assets, the government and (ostensibly) the citizens finally get a say in what the hell is happening with that guy.
So to recap:
You have a vendetta against a guy, for grievances, some legitimate, and want the law to change, specifically to get him, because you hate what he says. You also want to nationalize his businesses, that he built, that he did not have to build, that now employ 140,000 people, that he did not have to employ, with those 140,000 people almost all being high income earners paying higher tax rates when they may not have otherwise, out of your hate.
I would call that greed and a despicable position.
On that note, it's also completely pointless. If you were to literally liquidate every billionaire in America, every single one, and somehow got current market rates for every single stock share, 100% tax rate beyond $1B... we would cover the deficit for 3 years. With everyone else still paying taxes. Then we're back to square one, running a $2T deficit every year with no billionaires to liquidate. It's entirely catharsis that accomplishes nothing. If such a tax were even passed, we wouldn't make it to the next election cycle before it's a problem again.
> If we limited individual wealth to $999 million--just outright capped it, and enforced that--it would not impact these people in the slightest.
It would certainly impact their willingness to do the company-building that creates all those innovations and jobs.
With such a rule, Tesla wouldn't exist, no electric cars, no SpaceX, no cheap advanced launch tech; basically most of the modern world would be choked in the crib by taking away the incentive to build it.
If some person isn't willing to do company building because they are already at the cap so it won't make them any more money, that just means that someone else will do that. We have a planet of 8 billion humans; there's no shortage of human talent.
This is an untested assumption, as it takes quite a bit of CapEx without return to start a rocket company, or a tunnel boring company, or a car company.
Top 1% of the US holds 30% of the country's wealth
Bottom 50% only 2% of wealth
50% of the economy my ass, these takes don't even pass basic accounting logic these days
> How about the rich say that 50% of the economy should pay their fair share?
Someone with $1b of assets gets far more value from a modern stable western society than someone with $10k of assets
> How about the rich say that 50% of the economy should pay their fair share?
How exactly do you propose that they pay their fair share when they literally do not have the money or assets to do so? Are you proposing modern day slavery? Perhaps people selling their family? I'm curious what happens if you take this line of thought to it's actual conclusion.
How about instead of taxes, we have a $10,000 per year subscription fee to live in society.
Maybe different depending on area, like $20,000 a year to live in NYC but only $2,000 per year to live in a rural village.
If you can't afford the fee that's OK, it just means you have to live outside of the developed areas and don't benefit from any services provided by the government. But you are free to set up a tent in the woods and live off the land.
The solution is obvious and simple: Tax wealth not work.
Even if you were to liquidate every billionaire in America, at a 100% tax rate above $1 billion, and were able to sell the shares at current stock prices without a collapse, you would pay for the government deficit for... 3 years. Because their combined wealth, on paper, is $7T while we're running over $2T shortfalls every year.
3 years of not taking out debt, while still needing everyone else to pay current rates. Then you're back to square one. Sans billionaires and sans any major capital investment anywhere.
Now explain the 2017 Tax Cuts and Jobs Act.
Well, it depends. One possible answer is that we should make sure that everyone is wealthy enough to pay taxes by redistributing the wealth. ~
If they are only taxed at an effective rate of 3%, there is something being taxed.
I don't think people should be able to vote on massive tax increase laws, if it doesn't also increase their own taxes in some way.
I did a bit of mild googling.
1% of Americans control 30% of the wealth of the nation, and apparently 12% of property.
It's more than reasonable that people with that much wealth to their name pay the vast majority of the taxes, as it used to be.
From a nation building perspective, there's no reason to allow a couple hundred people to wield 52,000,000,000,000$ worth of assets. It means the economy has gotten far too clumpy and needs some redistribution. This isn't even really all that anti-capitalist. Capitalism can't survive long term without budding up against a government that regulates it.
1% of Americans would be over 3 million people, not a couple hundred.
.1% hold 12.6% of national wealth so that's 300,000 people. It tends to clump at the top, apparently.
In any case, it seems a bit bizarre to me that the wealth is distributed so unevenly. Do you believe those 3 million people work so hard that their value is that much higher than the combined output of 297 million people?
To be in the top .1% you need a wealth of about $60m, certainly nothing to be worried about, it gives you a very nice standard of living.
But it's a lot nearer to someone at the 90%ile wealth of about $2m than the kind of power that those with $1b, let alone centi-billionaires, have. You're talking top level entertainers (actors, sportmen etc)
Good point, maybe the more important statistic is that there's 900 billionaires in America, representing about 7 trillion in collective wealth. The USA GDP is 30 trillion... the situation just seems inherently wrong to me.
You are comparing a stock to a flow. Billionares in the US don't make $7 trillion per year. They accumulated that wealth over their lifetimes. If you want to compare apples to apples: The net worth of the US (as much as that concept can make sense) is around $176 trillion. That includes $269 trillion in assets and $123 trillion in debts.
Sure, all I'm saying is it's bizarre that the country allows its resources to be allocated so inefficiently.
In a capitalist system, capital makes the rules for everyone. This is why capital earns more than labour. System working as intended.
A capitalist system is built on the idea that holders of capital actually deploy that capital, rather than horde it.
If capital holders don’t actually deploy that capital and compete with each other, then you don’t have a capitalist system anymore. You have a feudal system, where asset holders extract resources through rents, rather than capital deployment and risk taking.
Can you point me to the data showing how much capital is horded?
"Is the capital being deployed for rent seeking or for taking economically useful risks?" is a judgement call. You won't find it listed in a FRED time series.
When every industry is on a multi-decade streak of consolidation, when McDonalds is about land speculation rather than serving food, farming is about land ownership rather than growing food, airlines are about credit cards rather than transportation, it's not unreasonable to believe that a substantial amount of capital is being deployed towards rent-seeking rather than economically useful risk taking.
Would this not still be the case even if labor wasn't entirely outpaced by capital?
Sorta depends on where one draws the line, but the line you are drawing, suggest there should be no government, so "system not working as intended"
There's always a government. There isn't always an electable, accountable, removable government. Run - no matter how partially - for the common good.
I don't think they were thinking of "no government", rather something like "government working in support of capital" (see 2008 financial crisis bank bail-outs; enforcing private ownership and protecting accumulated wealth).
Governments are fine. Any group of people large enough to not be a hivemind on everything has a government. Even if they don't formalize it, it will still emerge organically as they run into issues that require consensus on actions.
The crucial difference is between the governments actually run by the people, and the governments that claim to "represent" them.
How little imagination we have anymore! Its like you discover ice cream but for some reason only chocolate ice cream. Someone is like "chocolate is no good" and all you know to think is: "Oh so you guys just dont want ice cream at all?!"
It's a government of capitalists by capitalists for capitalists.
Rich people pay pretty much all taxes in the United States.
Yeah, and they should pay more.
No thanks. I’ll happily vote against this at any opportunity.
It's the right thing. Let's say one compaagny makes everything.
Then it should be asked to give a part of it for free. Not necessarily money by the way.
Very well put. I am working on tooling that will likely increase developer productivity by a large factor; and will most likely be used to lay off more developers as their labor is no longer required.
I often ask myself whether that is ethical or not. But in the end, it’s not the tooling that’s unethical. Productivity increases are good for everyone, under normal circumstances.
It’s the fact that all the gains are being collected by the already uber-wealthy that’s wrong.
> I often ask myself whether that is ethical or not. But in the end, it’s not the tooling that’s unethical. Productivity increases are good for everyone, under normal circumstances.
So if I'm reading your comment right, you think it would be ethical under normal circumstances, but also believe we don't live under those normal circumstances? In that case i think the answer you're looking for is: it is not ethical to develop these tools under the current circumstances.
Interesting take. Not that I disagree, but it’s interesting to see that on HN.
Wouldn’t that mean that it’s unethical to work on anything that improves productivity? AI, in particular?
As long as (almost) all the benefits/wealth generated by your work is captured by the 0.1%?
Because that’s the case right now.
The problem isn't the benefits per se, it's that the downsides are shouldered by everyone else while the benefits accrue to 0.1%. At which point it's just stealing from the commons.
If your tooling gains attention, will you take seed money from rich VCs?
When the product succeeds and you get offers to exit, would you sell to the uber-wealthy? They will exploit your user's data and collect the gains.
Those are the questions you should be honestly asking yourself when considering your own ethics. What's your price?
Im not owning the product. I’m getting a wage (and some stocks, so I guess I own .0000001% of it or so).
Economists generally agree that taxing capital owners is bad policy and taxes should be directed at consumers: https://www.npr.org/sections/money/2012/07/19/157047211/six-...
> Three: Eliminate the corporate income tax. Completely. If companies reinvest the money into their businesses, that's good. Don't tax companies in an effort to tax rich people.
> Four: Eliminate all income and payroll taxes. All of them. For everyone. Taxes discourage whatever you're taxing, but we like income, so why tax it? Payroll taxes discourage creating jobs. Not such a good idea. Instead, impose a consumption tax, designed to be progressive to protect lower-income households.
Our fundamental problem is not that we don't tax Jeff Bezos. It's that we don't tax the people who have multiple boxes of Chinese goods coming from Amazon to their houses every day.
Taxes discourage whatever you're taxing, but we like consumption, so why tax it? Sales taxes discourage velocity of money. Not such a good idea. Instead, impose an income tax, designed to be progressive to protect lower income households.
Because if you're taxing income, you're discouraging production, and discouraging consumption is better than discouraging production.
Why need production if you don't have consumption? I jest, only partially.
I suppose it's because taxing income is a lot easier to do progressively than taxing consumption.
You can't meter how many times someone has been out to eat or how many gallons of gas they have put into their car, but you can more easily track what their employer puts in their bank account.
Argue with the economists not with me.
Tractors largely replaced human labour in farming about a hundred years ago. Should we have started taxing tractors?
I really have difficulties seeing AI as anything else than yet another type of machinery. If your argument is "but it's replacing ALMOST ALL human labour" - well, the same argument was valid for tractors a hundred years ago (when almost everyone was employed in agriculture).
This argument hinges rather strongly on whether or not AI is going to create a broad, durable, and lasting unemployment effect.
Tractors did not cause this phenomenon because jevons paradox kicked in and induced demand rendered the problem moot, or demand eventually exceeded what mere tractors were capable of doing for agricultural productivity.
The same can probably be said for contemporary AI, but it's tough to tell right now. There's some scant indications we've scaled LLMs as far as they can go without another fundamental discovery similar to the attention paper in 2017. GPT-5 was underwhelming, and each new Claude Opus is an incremental improvement at best, still unable to execute an entire business idea from a single prompt. If we don't continue to see large leaps in capability like circa 2021-2022, then it can be argued jevons paradox will kick in here and at best LLMs will be a productivity multiplier for already experienced white collar workers - not a replacement for them.
All this being said, technological unemployment is not something that will be sudden or obvious, nor will human innovation always stay under jevons paradox, and I think policymakers need to seriously entertain taboo solutions for it sooner or later. Such as a WPA-style infrastructure project or basic income.
> technological unemployment is not something that will be sudden or obvious
I already have friends experiencing technological unemployment. Programmers suddenly need backup plans. Several designers I know are changing careers. Not to mention, the voiceover artist profession will probably cease to exist besides this last batch of known voices. Writer, editor - these were dependable careers for friends, once. A friend travelled the world and did freelance copyediting for large clients.
ChatGPT was just released three years ago.
People keep trying to tie these two things together, forgetting the fact that ZIRP also ended 3 years ago, and that combined with the end of the COVID-era employer credits are when the layoffs really began. I won't say LLMs are having no impact at all on employment, but not to the degree where the job pool has dried up. Companies were encouraged to over-hire for years, and now that the free money is gone, they're acting logically. I believe if ZIRP came back we'd see workforces expand again and AI would just be seen as another useful tool.
The mishandling of how they rewrote section 174 of the tax code also caused a lot of layoffs of developers.
Only in the US but ZIRP and redundancies have been worldwide
ZIRP, IRS Section 174, and irrationally exuberant over hiring caused the first few rounds of layoffs.
The layoffs you see now are due to offshoring disguised as AI taking over. Google, Amazon, and even Hollywood are getting in on the offshoring craze.
> Programmers suddenly need backup plans.
Yup, Claude Opus 4.5 + Claude Code feels like its teetering right on the edge of Jevon's Paradox. It can't work alone, and it needs human design and code review, if only to ensure it understands the problem and produces maintainable code. But it can build very credible drafts of entire features based on a couple of hours of planning, then I can spend a day reading closely and tweaking for quality. But the code? It's professional work, and I've worked with contractors who did a lot worse.
So right now? Opus 4.5 feels like an enormous productivity booster for existing developers (which may indirectly create unemployment or increase the demand for software enough to create jobs), but it can't work on large projects on an ongoing basis without a knowledgeable human. So it's more like a tractor than anything else: It might cause programmer unemployment, but eh, life happens.
But I can increasingly see that it would only take about one more breakthrough, and next gen AI models might make enormous categories of human intellectual labor about as obsolete as the buggy whip. If you could get a Stanford grad for a couple of dollars an hour, what would the humans actually do? (Manual labor will be replaced slower. Rod Brooks from the MIT AI Lab had a long article recently on state of robotics, and it sounds like they are still heavily handicapped by inadequate hardware: https://rodneybrooks.com/why-todays-humanoids-wont-learn-dex... )
Jevon's Paradox and comparative advantage won't protect you forever if you effectively create a "competitor species" with better price-performance across the board. That's what happened to the chimps and Homo neanderthalensis. And they didn't exactly see a lot of economic benefits from the rise of Homo sapiens, you know?
In my experience the code quickly becomes less than professional once the human stops monitoring what's going on.
"Inadequate hardware" is a truly ridiculous myth. The universal robot problem was, and is, and always will be an AI problem.
Just take one long look at the kind of utter garbage human mind has to work with. It's a frame that, without a hideous amount of wetware doing data processing, can't even keep its own limbs tracked - because proprioreception is made of wet meat noise and integration error. Smartphones in 2010 shipped with better IMUs, and today's smartphones ship with better cameras.
Modern robot frames just have a different set of tradeoffs from the human body. They're well into "good enough" overall. But we are yet to make a general purpose AI that would be able to do "universal robot" things. We can't even do it in a sim with perfect sensors and actuators.
Read Brooks' argument in detail, if you haven't. He has spent decades getting robots to play nicely in human environments, and he gets invited to an enormous number of modern robotics demonstrations.
His hardware argument is primarily sensory. Specifically, current generation robots, no matter how clever they might be, have a physical sensorium that's incredibly impoverished, about on par with a human with severe frostbite. Even if you try to use humans as teleoperators, it's incredibly awkward and frustrating, and they have to massively over-rely on vision. And fine-detail manual dexterity is hopeless. When you can see someone teleoperate a robot and knit a patterned hat, or even detach two stuck Lego bricks, then robots will have the sensors needed for human-level dexterity.
I think it's too early for AI to have impacted software work at a systemic level. There are various reasons the market is crap right now, like how you're (perhaps unknowingly) competing with cheap foreign labor in your own metro centers for tech work.
AI is just the other pincer that will finish the kill shot.
The refrigerator put paid to the shipping-ice-from-the-arctic-circle industry quickly as well. The main shock is for the people who write stuff we read, as they never expected to be in a profession that could be automated away. Lots and lots of stuff has been automated away, but we never heard their voices.
> This argument hinges rather strongly on whether or not AI is going to create a broad, durable, and lasting unemployment effect.
I think GP's argument makes a pretty strong case that it won't, even if AI somehow successfully automates 99% of all currently existing tasks. We automated away 99% of jobs once during the agricultural revolution and it didn't result in "a broad, durable, and lasting unemployment effect" then. Quite the opposite in fact.
Maybe if AI actually automates 100% of everything then we'll need to think about this more. But that seems unlikely to happen anytime in the foreseeable future given the current trajectory of the technology. (Even 50% seems unlikely.)
When most of the human population were farmers should we have taxed advances in agriculture which destroyed the everybody’s job?
Yes
> The same can probably be said for contemporary AI, but it's tough to tell right now
The same can't even be said for contemporary AI, because lots of the jobs it's going to replace are theoretical or hype. Self-driving cars should've been here years ago, but because AI is extremely hard to improve upon once it gets to a certain level of efficacy, they haven't happened.
The question is: should we be discussing this stuff when AI hasn't started taking all those jobs yet?
I think it's fine to discuss solutions to hypothetical future problems as long as it's clear that these are hypothetical future problems you're talking about, not present reality.
In many of these discussions that line seems to get blurred and I start to get the impression people are using the specter of a vague, poorly understood hypothetical future problem to argue for concrete societal changes now.
> each new Claude Opus is an incremental improvement at best, still unable to execute an entire business idea from a single prompt.
If your way of evaluating the progress of AI is a binary one, then you'll see no progress at all until suddenly it passes that bar.
But seeing that we do have incremental improvements on essentially all evals (and my own experience), even if it takes another decade we should be planning for it now. Even if it does require an entirely fundamental breakthrough like the attention paper, given the amount of researchers working on it, and capital devoted to it, I wouldn't put any money against such a breakthrough arriving before long.
>The same can probably be said for contemporary AI, but it's tough to tell right now. There's some scant indications we've scaled LLMs as far as they can go without another fundamental discovery similar to the attention paper in 2017. GPT-5 was underwhelming, and each new Claude Opus is an incremental improvement at best, still unable to execute an entire business idea from a single prompt. If we don't continue to see large leaps in capability like circa 2021-2022, then it can be argued jevons paradox will kick in here and at best LLMs will be a productivity multiplier for already experienced white collar workers - not a replacement for them.
The NBA has an incredibly high demand for 14-foot-tall basketball players, but none have shown up to apply. Similarly, if this causes our economy to increase demand for people to "execute an entire business ide from a single prompt", it does not mean unemployment can be alleviated by moving all the jobless into roles like that.
We don't need science fiction AI that will put everyone out of work for it to be ruinous. We only need half-assed AI good enough that they don't want to pay a burgerflipper to flip burgers anymore, and it'll all go to hell.
Basic income doesn’t do anything. We already have food stamps and so on. The largest sector of US federal spending is health and social welfare. We’d have to end pretty much all those programs to run a minuscule basic income.
> We’d have to end pretty much all those programs to run a minuscule basic income
Isn't ending all those programs one of the core ideas of universal basic income? Instead of having a huge bureaucracy administering targeted social welfare you cut all the overhead and just pay everyone enough to exist, regardless of whether you actually need it. It'd still be more expensive, but giving people something dependable to fall back on would hopefully increase innovation and entrepreneurship, offsetting some of the costs
Okay so let’s divide the US federal budget by the number of people. So $21k per person. Now what happens to the guy who needs dialysis. It costs $60k. Right now the federal government pays. Now it’s given him a third the cost back. He just dies?
That’s a matter of where you get your taxes from. Plenty of corporations can afford to pay a more fair share. And studies on basic income have so far shown it to be effective.
> Plenty of corporations can afford to pay a more fair share
Can we stop pretending with the word "fair"? If you want to squeeze out more money then you do it by force. It's not "fair". It's just "we can do this".
If everything's automated then you don't need taxes to pay people.
Let me know when we live in The Culture, but I’ve got a feeling fully automated luxury gay space communism is a long ways off
Then what's the problem? AI is a problem (apparently) if everything is automated. Otherwise people have jobs and carry on as before.
Imagine a society that is halfway to that. So, say, there are only enough jobs for half of the people, but the rest still want to eat.
Studies on basic income have shown that it's harmful to the people who receive it.
They report no improvements on any measured outcome. Not lower stress, not more education, not better health. They work a bit less but that doesn't help them or their kids.
Over the long term it harms them because their productive skills, values, and emotional capacities atrophy away from lack of use.
> Studies on basic income have shown that it's harmful to the people who receive it.
That's extremely interesting, can you link such studies?
"Final verdict on Finland's basic income trial: More happiness but little employment effect"
https://yle.fi/a/3-11337944 https://www.helsinki.fi/en/news/fair-society/universal-basic...
so basic income caused more happiness, less stress. but those are not profitable things, so, no basic income in finland.
What’s the alternative, if AI does turn out to be able to replace large swathes of the workforce? Just kill everyone?
You could ban it and then turn all existing employment into a makework jobs program, but this doesn’t seem sustainable: work you know is pointless is just as psychically corrosive, and in any event companies will just leave for less-regulated shores where AI is allowed.
>Over the long term it harms them
Yes, but not for the reasons you state. It harms them because we have an zero desire as a society to effectively combat inflation, which negates any benefits we can give people who receive the basic income.
The powers-that-be don't take action to make sure the people who get basic income can actually use it to improve their lives. Food prices rapidly inflate, education costs skyrocket, medical costs increase exponentially almost overnight.
Much like how the government backstopping student loans basically got university costs to jump, promising to give people a basic income while not addressing the root causes of inequality and wealth disparity just makes things worse.
If you want basic income to truly work, you have to engage in some activities in the short term that are inherently un-capitalistic, although if done correctly, actually improve capitalism as a whole for society. Price controls and freezes, slashing executive pay, increasing taxes on the wealthiest, etc.
what studies are those?
Whats the alternative? Kill off all humans replaced by AI unable to do something else for a living? Its sad enough that there are food stamps given the amount of food that regularly ends up in a dumpster on a daily basis. Humans come first, not machinery.
Nobody needs to kill anyone, people will just stop having kids which is what’s happening
Whats with the people already alive? If u continuously replace them with AI u need to support them in case of their inability to provide for themselves. Im afraid the worldwide available social security nets in place aren't made for withstanding this kind of unemployment.
They’ll have to adapt like every other generation has had to
My grandmother was born in 1924 and died in 2019 please appreciate how much change she had to adapt to over that period
And when did work done by humans stop existing between 1924 and 1990? Because that's the type of change we are talking about.
Well considering that she had a bunch of secretaries doing typing for her as a bank manager then transitioned to a world where there were no typists anymore was a pretty explicit change from her perspective.
She never learned how to type on a keyboard so you do the math
Well the math is that the amount of jobs done by humans in that period of time is above zero.
The math is: her job disappeared so she had to retire to a low income housing unit funded by HUD in Houston
Your grandma had plenty of opportunities in the post war eras. During her time there was always a need for human workers. While I dont think AI can actually replace anyone reliably, I still can see how executives buy into this promise and try it. This is a unique situation humanity never was confronted with. Even the industrialization required a lot of human work. If all white collar jobs went away there is a huge imbalance in available workers vs available work. Simply adapting to this isn't a thing given that monopolies killed competition and its not feasible for your everyday Joe to break into markets anymore. Kudos to your grandma for making it this long, simply not a comparable situation however.
Survivorship bias
What you’re not counting is all of the millions of people who died because they couldn’t actually adapt to the new world
Which is fine but they didn’t need to be killed, they just became irrelevant and went away
So you are the type of person that actively contributes to the world being as shit as it is. Good to know. Your disregard for the weak disgusts me. Have a good evening.
So what are you going to do about it? You should probably do something then
The people who own the magical AIs won't decide that they want to keep us all as pets, we won't have leverage to demand that they keep us all as pets, and they will have the resources to make sure they no longer need to keep us as pets. Shouting "You should keep humans as pets" is unlikely to change this fundamental equation.
>The largest sector of US federal spending is health and social welfare.
On old people who can't or don't work.
they will likely die first when society collapses
I think you're basing AI only on modern 2025 LLMs.
If there is a magnitude increase in compute (TPUs, NPUs, etc) over the next 3-5 years then even marginal increases in LLM usability will take white collar jobs.
If there is an exponential increase in power (fusion) and compute (quantum) combined with improvements in robotics and you're in the territory where humans can entirely be replaced in all industries (blue collar, white collar, doctors, lawyers, etc).
OTOH if there is worldwide catastrophic economic collapse due to climate change none of these things will get built.
In French we say "With "ifs" you can put Paris in a bottle."
Where does all the power come from? Compute increases have to has sustainable power source and we don’t have that.
We didn’t tax tractors, but we did tax the expanded economy tractors enabled, and built institutions to manage the transition.
Ex-farmhands had time to move into new jobs created by the Industrial Revolution, and it took decades. People also moved into knowledge work. What happens when AI takes all those jobs in far less time, with no other industries to offer employment?
If AI makes a few people trillionaires while hollowing out the middle class, how do we keep the lights on?
> If AI makes a few people trillionaires while hollowing out the middle class, how do we keep the lights on?
Tax the thing you care about? You don't need to care really about the definition of AI or what an AI is or anything like that, you care that some people got trillions.
Tax "making an absolute shitton of money" or "being worth an insane amount". Taxing AI specifically means you're absolutely fucked if Altman turns out to not earn that much but someone who makes a specific connector to data centres is the richest person in the world. Is Nvidia an AI company? What is AI? *Who cares?* The point is to figure out some way as a society of continuing.
Easy to say in a online forum, I imagine this could quite literally start a civil war in some nations.
There is a scene of wealth transfer agent simulations. With some dynamics you easily end up in a situation where after enough transactions, all of the wealth is concentrated on one single agent. Think about "I am the state" but extended to the whole world. Billionaires trying to affect countries' elections seems child's play compared to that.
Tax is kinda tangential to all of this, but:
> Tractors largely replaced human labour in farming about a hundred years ago
And what happened around that time? yeah it wasn't a period of smooth calmness was it? Periods of massive changes in productivity (ie lots of people going into unemployment) causes huge societal changes.
The thing that staved off revolution in the US was lots of spending, banking regulations, federal reserve, new deal and the like. Those that didn't do that, fell.
So its less about who pays tax, and more about who is going to give money to the unemployed?
If something transformative is just coming in and threatens the economic flows that sustains your social model, it is worth asking the question of how the economic flows should be proactively updated moving forward.
The tractor created the middle class by giving more people access to jobs that paid better and provided more free time. It is yet to be proven who will benefit from the advancement of LLMs, but there is some consensus in the article that the large companies operating these LLMs will be. From there, proposing taxes on that additional profit doesn't seem ridiculous.
Where do you live? Are tractors not taxed as motor vehicles in your country?
Normally not unless they travel on public roads. If it's just used for farming it doesn't have to be registered.
If we tax at the state level like motor vehicles, what happens when AI living in a Texas datacenter replaces 1 million jobs in Florida? The people are in Florida, but the money goes to Texas.
Nope.
They even get to use fuel that has less taxes on it since they don't drive on public roads.
Tractors replaced a task in specific fields, farming, construction largely. AI seems to have the potential to cover more territory. The potential blast radius is greater.
Agricultural jobs accounted for more than 80% of the preindustrial workforce. Granted you still needed people to maintain the jobs and some roles weren't entirely replaced or replaceable. I wonder how the two compare. I will say that AI has the opportunity to affect many lines of work which makes it scary for many.
80% was peak agriculture, but involvement was already in decline before the tractor. Necessarily so — nobody would have had time to create the tractor if they were still busy toiling in the field. The tractor was the final death knell, I suppose, but only around 40% of the workforce was involved in agriculture by the time the tractor started showing up on farms.
> AI seems to have the potential to cover more territory.
Theoretically, the only two things that any human go to earn money is (a) use muscles or (b) use brains.
I feel like AI plus robots covers all the territory. Maybe not quite yet - maybe we have a few more years, but what job could a human do that couldn't be done by an AI controlling a humanoid robot?
I'm not arguing for taxing AI (or tractors) -- but...if we made the wrong decision 100yrs ago, should we make the wrong decision again? It is worth debating.
The wrong decision wasn't using productivity enhancers - it was building a society around the idea that everyone MUST have a job, even in the presence of substantial productivity enhancers which massively decrease the number of jobs. We've scraped by so far... so far.
The problem is that for the vast majority of people to be psychologically healthy they must have a job. This isn't a societal decision, it's a reality about how humans are.
The alternative is like feeding an animal instead of letting it live the lifestyle it's adapted for. That helps it in the moment but over time its capacities atrophy and it ends up weakened, twisted and harmed with nothing to spend its natural instincts on.
> The problem is that for the vast majority of people to be psychologically healthy they must have a job. This isn't a societal decision, it's a reality about how humans are.
The "job" can be things like volunteering, artwork, finding a cause, inventing, raising children, teaching...
Work can be subsidized and based around personal interest and achieve the "psychologically healthy" aspect that you describe.
> volunteering
Sure, I guess -- if you're not charging for your time, it's more efficient to use human labor than AI+robots.
> inventing
If we get working AI, humans will be unemployable at inventing useful things.
> teaching
There are already multiple startups trying to replace teachers in the classroom.
> If we get working AI, humans will be unemployable at inventing useful things.
The point you're responding to is that humans would be able to do it for personal fulfillment and thus preserve their mental health, not to be useful to someone else.
> inventing
When they used to say that you'd make more money going to university, that is what they were talking about. The idea was that if you went into the research labs you'd develop capital to multiply human output, which is how you make more money. Most ended up confusing the messaging with "go to university to get a job — the same job you would have done anyway..." and incomes have held stagnant as a result. It was an interesting dream, though.
But not really what everyday normal people want. They like to have somewhere they can show up to and be told what to do, so to speak.
I would wager that more jobs accelerate psychological and physiological issues than, say, volunteering or unemployment with active community engagement do. At the very least, the psychological benefits of unemployment are objectively an incidental side-effect of its actual purpose, which is labor for a profitable enterprise. That is to say that employment is still "functional" if it generates that labor even while destroying someone's psychological health. If that health is paramount, the structure of employment probably needs to change in order to privilege health over productivity, even to productivity's detriment. Otherwise, the vast majority of people would be better off with some other institution.
They must have something interesting to do. It doesn't have to be a job.
The ideal society is one where humans only do things that they actually enjoy doing, whatever that is, and automation does the rest. Any human being forced to perform labor not because they want to, but because they need to do so to survive, should be considered a blight on the honor of our species.
This viewpoint seems to be at odds with the well documented human phenomenon of "retirement"
Your viewpoint is at odds with the well documented human phenomenon called "Retirement Syndrome".
Pretty sure farmers don't buy them tax free? I'm sure they write some of the cost off, but they still foot the rest of the tax burden.
>Pretty sure farmers don't buy them tax free? [...], but they still foot the rest of the tax burden.
To clarify, this isn't about the farmer paying a "sales tax" or VAT as % of the price of buying the tractor.
The article is talking about something else: paying additional machine taxes to cover the loss of unemployed crop workers that would have been paying individual income taxes.
Oh I get it, but I do find it silly, because that only means that the company running the models pay more in taxes for providing you with a service, which is weird to me. Especially if they keep costs down on goods and services, allowing us to focus on quality of output more. At least that's what Claude Code has done for my side projects.
> Pretty sure farmers don't buy them tax free?
I do. Agriculture products are zero-rated. But obviously it depends on jurisdiction.
We did in a way. Tractors help produce more goods. Those goods incur VAT at the point of sale to consumers.
They don't "help produce more goods". They "reduce the need for human labor", enabling fewer people to produce as much as before.
That's exactly what AI is doing.
These two waves of automation are fundamentally different and shouldn’t be compared.
We got lucky that when farming was being mechanized, it happened slowly and while manufacturing was still growing and could soak up the labor. When manufacturing was offshored/automated, we got less lucky and a lot of people faced a massive drop in quality of life as they lost their high paying jobs and couldn’t find equivalent ones in the service sector.
Now we’re seeing a potential massive job displacement, the force doing the displacing can likely also do many of the new jobs that may arise, and the change is happening faster than any ever before.
Capitalism doesn’t promise to create new jobs when old ones are automated, we’ve just gotten lucky in the past, and our luck has run out.
We didn’t do X before therefore we shouldn’t do X today under very different circumstances is not a good argument.
You’ve already stated what circumstances are different now.
> Should we have started taxing tractors?
Tractors are taxed in Montana. We have a "business equipment tax" that works roughly like the tax on cars, but applies to assets that don't drive on the public highway such as tractors and other machinery. Republicans have waged a decades long campaign to reduce/abolish it though.
> when almost everyone was employed in agriculture
Employment was a product of the industrial revolution. In the age when most everyone worked in agriculture, they owned the farm operation.
We didn't tax the tractor to bail out failing small businesses then, and I strongly suspect there is no will to tax AI to bail out failing small businesses that might succumb to AI today either. The population generally doesn't like small businesses and is more than happy to see them fail.
It feels really alien to discuss this in terms of "taxing AI", like an economic abstraction completely breaking down. Ultimately when you take automation to its logical conclusion we have people with needs and we have machines and automation capable of meeting those needs with minimal human labor.
No matter how you try to resolve this economically, it should hold that if something can be produced with minimal human labor, it shouldn't require substantial human labor to buy (in "reasonable" quantities, however you want to define and enforce that).
Without understanding the "end game" of automation (decades+ from now) it feels like we're just sleepwalking into an absurd reality where a few trillionaires own the world's fully automated food supply chain, but buying food somehow requires just as much labor as it does today.
You're completely omitting externalised cost, though. As it stands, all this production requires gargantuan amounts of energy that have to come from somewhere, and cause pollution and waste that must be accounted for. As long as these factors aren't solved—if they can be solved in the first place—either the prices for consumers or the manufacturing cost must reflect this, I don't see the increased degree automation affecting prices much.
Thank you, I keep reading these discussions and rarely see anyone touch on power and environmental factors.
How does more pollution/waste equal higher consumer cost? Do you mean because we'll have to pay more taxes because we'll need more publicly funded resources to clean up the excess waste? Or because corporations would pass the price of the fines for violating environmental regulations onto consumers?
It doesn't matter much how exactly those costs are passed on; someone has to eventually pay for them. That includes the energy itself, which doesn't come for free, but also the bill for environmental damage and resource exhaustion that we will have to pay at some point. You can argue that that'll be the case only in the far future, but then you're just externalising the cost—again—to future generations. It's all moot: Someone will pay for it eventually.
That has nothing to do with this, those are things that should still be solved at a much higher level of abstraction. Tax the energy, pollution, waste - those have problems regardless of what caused them.
The point I am making is that the reason artefacts of highly automated production (even with minimal human labor required) will never become accessible for very low human labor, because all that automation has its own cost. We can externalise that as long as possible and defer the bill to somewhere or someone else, but it will have to be paid eventually.
> […] those are things that should still be solved at a much higher level of abstraction […]
I don't think that makes much sense. If a data center consumes all available electricity in a given municipality, it may provide AI services at a very low cost, but thereby makes the region uninhabitable. There is no way to "solve" this at a higher abstraction level. Or alternatively, consider a factory producing consumer goods, which emits toxic fumes; we can limit the amount of fumes the vicinity of the factory is exposed to by implementing very expensive filters—thus increasing the final price of the goods—or externalise all the negative effects—such as health risks in the population, ecological demise, and subsequently lower property values—to society, achieving a lower final price.
Currently, we often pick the latter option, because it usually has the better profit margin. I agree that it's a systemic issue that must be addressed holistically, but the actual solutions have to be implemented at all levels of the production chain. And this means the cost attached will have to be included in the price of all goods.
> The point I am making is that the reason artefacts of highly automated production (even with minimal human labor required) will never become accessible for very low human labor, because all that automation has its own cost
While I'm not sure I agree, this is not solved by tackling things at a low level and should be done at a higher level of abstraction - that's what they were saying.
> don't think that makes much sense. If a data center consumes all available electricity in a given municipality, it may provide AI services at a very low cost, but thereby makes the region uninhabitable.
If the data center was providing streaming services would you want to manage that differently? Imagine you had a data center that solved some user problem X, and another one that solves the same problem. Data center A uses AI, B does not but uses more power. Would you want to tax B less? Given what you've said so far I'd assume the answer is no - you'd want to tax that more because it's not really the AI part you care about, it's the power usage/emissions/local impact/externality X you want to avoid.
> I agree that it's a systemic issue that must be addressed holistically, but the actual solutions have to be implemented at all levels of the production chain.
Actually the more abstract sometimes the fewer places you have to deal with it. You don't have to figure out what cars everyone has, the specific MPG of each, driving patterns, how far your delivery driver went, whether they had other packages, etc - you can tax gasoline. This automatically flows through and avoids lots of wrangling about details and loopholes.
> Currently, we often pick the latter option, because it usually has the better profit margin.
Yes - and this drive makes it hard to manage when you put very precise rules around it. Tax AI and watch things rebrand as whatever falls just outside the limits of AI. See how products are built, deconstructed and remade exactly based on specific tariffs. Ford used to ship vans with windows and seats installed, then take them out again after they arrived!
The end game you're describing (abundance with minimal labor) only works socially if we deliberately redesign distribution, not just production
This is the only correct answer.
I believe unfortunately it’s intractable because humans cannot successfully align incentives and actions at a scale large enough required to solve it
I see a natural equilibrium with a tension: automation (also through AI) causes unit economics to drop and results in cheaper prices. At the same time, salaries for contributors grow because their impact is so high. So you end up with a new equilibrium of much cheaper prices and much higher salaries. What, however, about the people who can’t contribute? IMO the most natural and fair approach is to support (through whatever means) people’s “education”, allowing them to upgrade their skills so that they can contribute. IMO this leads to a new tension: not rich vs poor, or useful vs useless, but people who can up-level their skills vs those who don’t. And I think, at its extreme, it boils down to this: how much plasticity does your brain have? Because every other constraint, society can adapt or accommodate for.
That is a game thoery approach but it completely fails in the face of reality.
The reality is that the floor to become "useful" is relatively low, which means the few billioanires have a large pool of potentially useful people of which they only employ some, leading to no greater salaries due to labour competition.
The other potentially useful workers cannot pool together and compete as the barrier of entry in the sector is prohibitely high.
So a natural moat emerges over cost of setting up a company, workers beg for a job of which they will take for a small wage and a few billioanires control the market.
This is a much closer approximation to the market we currently see
Yeah, that definitely won't work at scale. The bar for what constitutes being "educated" keeps increasing. Previously it was knowing how to code, now it is having an ML PhD, for example. At the same time, AI keeps getting more and more capable, so no matter how much "education" you have, AI will eventually get to you.
In any case, the argument won't work for majority of the population without a college degree. Are you going to have 50+ year old truck drivers upskilling in a fancy new tool to keep a job? And again, how long until that new skill you upgraded them to is now done by AI as well.
> salaries for contributors grow
I dont see that happening
Indeed that has not happened: https://tinyurl.com/3dutardj
No that's just a really misleading graph. Most of the gap disappears once you include variable pay like benefits, overtime, bonuses, stock comp etc.
See this explanation and corrected graph: https://fraser.stlouisfed.org/title/economic-synopses-6715/w...
There has been extensive debate around that topic since that paper came out. Some points to discuss:
1. Even the article you shared mentions that starting in 2003, earnings has stopped tracking productivity. "Total compensation remains close until 2003, but does not follow 2003’s uptick in productivity growth (behavior which remains a topic for future research)."
2. They use average earnings and not median earnings. Average earnings include people like CEOs. This by consequence shows that inequality among workers has also increased. Check out chart 4 here to see how much smaller median wages are compared to average: (https://www.csls.ca/ipm/23/IPM-23-Mishel-Gee.pdf)
3. Apart from the average vs median difference, the biggest point of contention between that study and more recent ones is the measure of inflation used. The 2007 study you cite uses a measure of inflation that also includes things paid by employers like medical insurance. It turns out that using that one leads to significantly lower inflation. If you use consumer price index, what workers actually pay out of pocket, the difference again becomes larger. Citing page 37 of the study above: "In other words, that the prices of consumer items has risen faster than a broader index of prices that includes net exports, government goods and services, and investment goods. Therefore, for a given increase in income, the purchasing power of the consumer has fallen faster than that of business for investment goods and foreigners for U.S. exports."
The article I shared before plus this other one describe all the discrepancies (https://www.epi.org/productivity-pay-gap/). Specially see chart 10 in the PDF study. That shows all possible variations of how you measure productivity and income. No matter how you look at it, the most substantiated conclusion is that income has NOT matched productivity.
I dont want benefits, overtime, bonuses, stock comp. I want cash. Money I have agency over.
I think the idea is that the trillionaires won't need us at all when the food supply is fully automated. They might keep a small population for genetic diversity, but that's about it.
Transition periods are always difficult, but they've always reached some equilibrium. Right now the spread between the two seem higher (not sure they are) but the system will bring them closer together.
World wars, revolutions, and violence are how we've reached equilibrium in the past.
We could, conceivably, learn from our mistakes and do something different now. But we're not.
There is no "system" to bring them together. Historically only revolutions and mainly violent protests have helped.
The real problem is that this question starts from what I think is a stupid premise.
If a startup that never had employees uses AI, should be it be taxed differently to a startup that never had employees that doesn't use AI? If so, what is the justification for that? It seems to me it can only be some hypothetical idea that humans might have been able to do some of the work at that company, even if they never have employed people to do that work.
Should a company be taxed more when it reduces employee count for any reason that doesn't involve AI? I'd say not, because otherwise you're forcing companies that are strapped for cash into near or actual bankruptcy instead of being able to downsize.
If a company should be taxed more for reducing employee count while also using AI, but not if they don't, wouldn't you just expect companies to outsource the AI component of the work to other companies?
It seems to me that the crux of this article is trying to find a justification to tax companies working in the AI space more without clearly articulating why.
Yes, the industries of today are going through a seismic shift, similar to the sewing revolution when sewers were losing jobs to machines, or when farm workers tilling the land by hand were replaced by machines, secretaries no longer being required as managers got computers and found it easier just to send an email themselves, etc.
In the near future, just as before, people whose skills are no longer required by industry will have to adapt to survive. But taxing industry just because it's becoming more efficient just has the effect of making that industry less competitive globally.
Interesting how this argument is only popping now that technology is threatening white collar workers.
Automation has been shoving blue collars out of the job market for a century.
A single farmer can do with his machinery today what took a dozen of people just 50 years ago.
Manufacturing has been super automated long ago.
Even in commerce automated checkout has been replacing workers for more than a decade.
In any case such a tax is not only pointless but actively dangerous, as all it achieves is making countries without such a tax more competitive.
This has been a question since at least the industrial revolution.
Perhaps the more interesting bit is that you only seemed to have noticed it when it is asked about white collar workers?
It's been around for nearly a decade.
Taxing Robots : Easier Said Than Done (2017) https://www.ctf.ca/EN/EN/Newsletters/Canadian_Tax_Focus/2017...
Robots, technological change and taxation (2017) https://www.taxjournal.com/articles/robots-technological-cha...
Why robots should be taxed if they take people's jobs (2017) https://www.theguardian.com/business/2017/mar/22/robots-tax-...
I think the current debate is less about whether automation happens and more about where the gains go
The same place they've always gone: to consumers purchasing the products made by those automated processes.
The average person now is far wealthier in terms of actual purchasing power than the average person 100 years ago, and that's largely because of automation making everything cheaper.
> The average person now is far wealthier in terms of actual purchasing power than the average person 100 years ago
access to housing is incredibly expensive. Measuring their purchasing power for how many scented candles they can buy is pretty meaningless when they are much closer to homelessness than ever before.
Land is one thing you can't automate the production of, and construction still consists mostly of manual skilled labor. But I think despite that you'll find housing today still compares very favorably to housing 100 years ago (in terms of median square footage, safety, amenities, etc).
This is actually _because_ automation has been so effective.
It's called Baumol's cost disease.
https://en.wikipedia.org/wiki/Baumol_effect
> The same place they've always gone: to consumers purchasing the products made by those automated processes.
The people who are "automated away" and have reduced income are also less of a consumer. In a society where most jobs are automated, who are the consumers?
You've spent your whole life living in a society where that's already happened. 1000 years ago nearly everyone was employed in agriculture. Now nearly all those jobs are automated.
So you tell me: where are the consumers? Why aren't we all unemployed and unable to afford to buy anything now that those agriculture jobs have been automated away? Or did we find other productive activities to spend our time on?
What makes you think this argument is popping? Or that it's only being discussed now, because of 1 article on a domain I've never heard of?
ElPais is the most important (by number of readers) Spanish newspaper.
I'm open to the idea that companies need much larger barriers to functioning internationally. Not just because of their ability to pump money overseas, but also because they are often used to blatantly further the security goals of their parent countries (looking at you two USA and China, but everyone able to, seems to do it).
Maybe the current system would've worked if it was built on many more small companies. These monolithic corporations funneling power upward are the death of civilization, and leadership are clearly high on their own farts. Or just want to be on top in a new feudal age.
This also makes labor laws much less effective because the companies move countries to avoid them.
It's dangerous but not pointless. If we get human mass unemployment, someone has to pay for them, and if the companies offering the AI sit in the US, most countries won't be able tax OpenAI & Co directly.
If anything, US AI companies will be eating the lunches of workers from all over the world. It'll be like a service export.
I'm not sure about that to be honest.
1. Financial perspective. People are too focused on what "the best" is, rather than what is the most financially viable at scale, which is what really matters. At the peak of the Ethereum mining craze in 2016/2017 the GTX Titan X was the best performing GPU. But buying 200$ AMD Polaris GPUs was what gave you the most performance per $ and per watt.
2. Open source models keep being impressive and lagging only so much behind the closed source ones. It's hard to predict the future, but few years from now the most viable application might be to internally fine tune and deploy on whatever cloud or internal infra open source models. I have already many use cases in prod where Gemini Flash 2.0 did a great job, and that's an old model by today's standards (summarizing news/translation). Now I have in production a service that reviews pull requests and updates documentation/JIRA accordingly when they are merged. That requires quite more plumbing, agentic approach and thinking, but yet again open source models can do a terrific job already there.
3. At the end of the day, the lion share is going to be eaten by whoever provides the best applications, not models, but conversely we're also living in a space where more and more you can just build roughly-the-same-feature with few $ worth of APIs.
4. Even more, the biggest benefit will lie among those who will leverage AI in the best way. Companies and individuals able to really delegate successfully complex tasks making crazy savings. Who knows who's really gonna take the biggest advantage. Maybe US companies, maybe not.
Thus, in essence, I envy your certainties around the future, I personally have lots and lots of doubts and have no clue who's gonna eat whoever's lunch.
> 1. Financial perspective. People are too focused on what "the best" is, rather than what is the most financially viable at scale, which is what really matters.
I don't think so: People flocked to ChatGPT because it was the best, even though there are far cheaper options. If you are 10% better than any competitor, you don't get just 10% more market share, you get far more. It's a winner-takes-most situation.
That's a money loser, I'm talking about who's gonna be able to monetize and leverage this.
Highly automated and connected business infrastructure will make replacing first world jobs the easiest, but yes as automation spreads, the spigot of job replacement will flow to every corner of the globe.
That's not the problem. The problem is that the revenue will flow to the US, and when those US companies are taxed, this will at most pay for an UBI for US Americans only. Which will mean the US gets very rich while the other countries get very poor, because there is no large AI company to tax.
Looking at the actual article, the people suggesting taxes on AI are American Nobel laureate Edmund Phelps, and Bill Gates, founder of MSFT. The Europeans suggest more general taxes on capital instead.
The latter makes sense. We also don't let steam engines and carts pay taxes just because they 'replace' (=displace) human labor.
Don't tax tools or income, tax the accumulation of it: wealth.
Taxing wealth is much harder on a practical and algorithmic level than taxing income.
But either way, taxing the tool is micromanaging the problem, and some powerful people cynically promote that because they can aim the details away from themselves.
Switzerland taxes wealth instead of capital gains (except for professional investors).
In some ways taxing wealth is quite simple, because wealth is already meticulously recorded via contracts and owners go out of their way to estimate the magnitude of their wealth for example to borrow money or for other financial and economic obligations.
Another approach would be to tax capital gains at the same rate as income and introduce additional top brackets. I have a hard time to find a good faith reason for capital gains to be taxed less than labor.
> In some ways taxing wealth is quite simple
But there are enough other ways where it's really hard and unsolved. Imagine someone bought an $X irreplaceable ancient urn to hold the ashes of their parents.
How do you calculate the $Y "wealth" inside that non-fungible urn on their mantelpiece today? How can one determine which "I would buy that for X" statements are falsely low or falsely high?
> owners go out of their way to estimate the magnitude of their wealth for example to borrow money
I have no inherent problem linking one voluntary claim of wealth to another conclusion of wealth... But what happens when someone wealthy who doesn't actually need any loans applies for them while presenting themselves as a pauper?
Or cases where someone seeks a loan and their rationale is "I may have negative net worth but you'll be made whole because you're first in line", as opposed to "I have high net worth"?
> I have a hard time to find a good faith reason for capital gains to be taxed less than labor.
Consider a small company of AcmeCo with 1-10 workers all dedicated to the art of Acme'ing, each taking tiny wages (but accepting shares) because they believe in the mission and want to launch the company.
On a technical level, anything they (might) get would be capital gains, but clearly it's not the same as passive rents with no labor behind it. It's closer to deferred wages.
In general I agree, but it's worth noting that rich people are also very interested in finding tax loopholes.
I heard that, at least in the US, you can avoid capital tax gain by just... never selling. Borrow against your wealth instead.
Capital gains are risky to generate. Many investments completely fail and when that happens, investors get very little tax relief.
If you increase capital gains tax, the more risky ideas will no longer be viable investment vehicles even though some of them would have been successful. Across the entire economy, the net effect will be less innovation, stagnation, and loss of power relative to foreign countries.
Tax rates are carefully tuned to maximize tax revenue without unduly disincentivizing production. To change them purely based on vibes would be catastrophically stupid.
Please don't vote.
> Many investments completely fail and when that happens, investors get very little tax relief
I don't really believe it. Investment is always incentivized by tax breaks and other political gifts. But once things turn bad it's the citizen's turn to pay for it. Fire all staff? We pay for unemployment. Pollute the soil? We pay for cleanup. Empty the water table? Guess who's gonna depend on the state for clean water...
> To change them purely based on vibes would be catastrophically stupid.
Please tell that to every neo liberal in my country. Reducing taxes on the rich seems to be their passtime, while every time some kind of capital gain is mentioned, everyone and their dogs become experts in economics and can tell you it's folly.
> Please don't vote.
Please don't look down on others.
> Taxing wealth is much harder on a practical and algorithmic level than taxing income.
I find this argument somewhat unconvincing. Where is most of the wealth? In hard assets, such as real estate and financial assets, such as stocks and bonds. The former are very difficult to hide, for obvious reasons. As for the latter, the ownership of every single share is recorded in large databases (e.g. DTCC, Clearstream and Euroclear). In that sense, the "physical location" of most of the wealth is well known, so in theory it should really not be difficult to tax it.
It really comes down to valuation.
The unit of account for tax is the currency of the relevant sovereign. Most contracts for income are denominated in that unit of account, even if it is not there is often a highly liquid market (FX) between units of account.
Most wealth is not stored in assets where the unit of account is that of the sovereign. This counts double for assets with a physical location.
This isn't something that can be easily hand-waived away.
I don't get it. Can you explain in simpler terms?
My understanding is that you say that taxing things denominated in a foreign currency is difficult? But why? I already pay taxes on my capital gains denominated in a foreign currency (for example dollars). There are official government exchange rates for tax reasons, published daily. I don't see anything to hand wave here, because there's no problem.
Not parent-poster, but I imagine the most difficult cases involve non-public stocks or non-fungible physical assets. Consider the problem of: "Someone purchased an irreplaceable ancient urn for $1m and put their parents ashes in it, what's that in taxable wealth today?"
It's too easy for people to offer hypothetical prices they'll never have to execute on. You could establish a price by forcing people to sell anything to the highest bidder, but that kinda explodes any conventional idea of property, and now the government is spending all its time running a trillion sketchy auctions while no human has time to do productive work anymore because your neighbor is trying to buy your car for $1 and you need to arrange a more-plausible offer before you lose it.
The million dollar earn is a fantastic example.
Apologies, in an attempt to be precise I have used convoluted language.
The point I'm trying to make is that assets such as land are not denominated in any currency and typically end up being held for such large amounts of time with such substantial transaction costs that's there would be a large cost involved in knowing what the value of the thing being taxed is.
If I pay you $100k, £100k or ¥100k we can use spot rates to work out how many € that is within much less than 1%.
If I own a piece of land how would you answer the question, "what should the value for taxation be?"
If you go with the last transaction price then this will have a substantial impact on properties that haven't been sold for a long time and encourage people to enter into transactions that look like sales but aren't (such a 999-year lease).
Leave it up to a government agency to decide and this agency will come under huge pressure to favour one type of activity over another. How do you value land owned by the government? What if that land is privatised? The UK's attempts to deal with this when it privatised BT completely destroyed the fibre to the premises industry in the UK for years.
Thank you! That makes perfect sense. I admit my financial vocabulary is lacking.
I completely agree you then. I think people arguing for wealth tax severely underestimate how many edge cases and loopholes there are.
Financial assets are extremely easy to hide. Set up an international chain of shell companies, foundations, and trusts, install a fake beneficial owner or trustee or two at various points, carve out deductibles for IP and "services", and the ownership becomes completely opaque.
And that's just the legal version.
I know someone who used to work as a business lawyer. She spent years trying to track down the true owners in various cases. At the very least it's an expensive business. And sometimes it just couldn't be done.
Of course governments can cut the knot with physical assets, walk into a building with troops and/or police, and say "This is ours now." Or they can order banks to hand over the money in accounts.
But before they can do that, there has to be some certainty about the owner. And even getting part way there can take a while and cost a lot.
A flat tax on wealth would be extremely easy to enforce. Basically if the bill for an asset doesn't get paid it goes to the government, and the bill is trivial to calculate because it doesn't need the rest of the entity.
> A flat tax on wealth would be extremely easy to enforce.
The real problem has always been measuring "current wealth" with accuracy, fairness, and not spending more than you collect on an army of auditors.
I don't see how "flat" makes anything easier, since it's a downstream calculation.
If you apply automatic tax on bonds people will just not buy them unless you also increase their returns. It's a pointless exercise. Same goes for stocks, it's just a bit bigger circle in this case. Capital gain tax is just a bad tax that distorts decisions and make things less efficient for no reason. It's much better to tax resources (mainly land but also infrastructure usage) and charge for enforcement of IP/patents.
But financial assets do not need physical space, so they can be tied to smaller countries which will be very happy to tax them at a lower rate so they can "steal them" from the original country where they were generated.
You can take your financial assets with you but they're ultimately worthless, they're just a construct that represents something which has real value, like shares of a company: its real estate, inventory, employees, institutional knowledge, and future productive output have real value, your piece of paper doesn't.
Distribution of wealth is about the distribution of real resources, especially control over human labor. And that underlying thing can always be taxed, optimized, or even repurposed to better serve the needs of society.
You can still tax based on the persons residence or citizenship. In the end someone can be attributed to wealth, and if they want to stay where they are physically, they should also tax like it.
> Taxing wealth is much harder on a practical and algorithmic level than taxing income.
Depends on the tax. It is a lot easier to move move profits to a low tax jurisdiction than it is to move land or machinery.
> But either way, taxing the tool is micromanaging the problem, and some powerful people cynically promote that because they can aim the details away from themselves.
I definitely agree with that.
There are all sorts of problems. Do you tax this notional "income" where the work is done or where the AI runs or where the company that owns it is incorporated?
I need to think about this more, but the first thing that comes to my mind is not that this looks like “taxing the tool”, but that this can (ought to?) be similar to an alcohol or a fuel duty.
Nobody calls alcohol duty “micromanagement”.
For products like petrol, it’s widely known that from money paid for a liter when it’s sold, say, in the UK, more money stays in the UK’s government pocket via a complex web of taxes and duties, than profits the oil production company that supplied crude oil for that petrol.
Maybe taxing a kWh of the AI data center energy consumption should be a thing? I don’t know.
> Nobody calls alcohol duty “micromanagement”.
They don't, but it really is! There's different rates for different specific gravity and different processes.
Re: petrol, I note that the UK government is trying to replace this as part of the EV transition with a milage tax, which is proving controversial and fiddly.
Energy tax is a hugely fraught political issue. The "poster child" for cheap energy is a little old lady huddled over a 1kW one bar electric heater. Energy bills are a big "fixed" cost for households. Many small businesses have been affected by energy price rises - e.g. restaurants. And yet at the other end AI represents such a huge deployment of capital expenditure that it's distorting prices for everything else - energy, RAM, and so on.
I think I'd favor a "personal allowance" model similar to income tax, where you get the first X units of energy tax free and then have to pay VAT, carbon taxes etc. on the rest of it.
> I think I'd favor a "personal allowance" model similar to income tax, where you get the first X units of energy tax free and then have to pay VAT, carbon taxes etc. on the rest of it.
I can see why this is tempting, but I think there's a better way to legislate with this, especially with that poster child.
I'm a landlord of a flat. I used to live in it before I left the UK. The EPC rating is D, so despite the double glazing it's still pretty cold in winter. I am now living in a fancy new-build in Berlin which, despite being 3 times the size of that flat, can be kept warm for 10 months of the year just by body heat and waste energy from the white goods — even with higher electricity costs in Germany, it costs less to be comfortable in this building in a T-shirt all year round (even while snow is falling outside), than to be wearing fleeces and sleeping with hot water bottles and still not be completely comfortable in that flat in the UK.
A few years back there was a proposal for legislation that would increase the requirements for all rental property to be at minimum C-rated by 2030, as I understand it this was dropped and the current minimum is F or something ridiculous like that. My agent's advice is to not do anything until the legislation is actually sorted, even though I'm happy to spend whatever to upgrade the place, because until you know what the legislation demands there's always a risk of doing the wrong work beforehand, having to rip it out and put something else in.
IMO, government should push for this kind of boost, as it has with other energy-saving and insulation-boosting measures.
My first rental after graduation was a Welsh solid stone wall construction; like the example you gave, I couldn't keep warm there even with the electric bar heater a meter from me.
The current minimum EPC rating is D. The legislation to raise it to C hasn't been dropped, they just haven't decided exactly what date it will take place. And it's stupid legislation because many old properties cannot be sensibly raised from D to C, and these are the properties (e.g. terraced housing) which are typically rented out. So, we have a housing crisis with too few properties available to rent and the legislation will force landlords to take rental property off the market. Madness.
There's a lot of not-joined-up thinking in the UK government. Has been for ages.
Like, the housing crisis in the UK, there's a lot of empty houses, they're just in places with no jobs, could encourage employers to go there, but HS2 mumble mumble. Could build more houses, but greenbelt, and existing homeowners like the house prices going up, and lots of builders were Polish and oh look Brexit.
Right now, winter fuel allowance is literally burning money because the houses are not good enough. This is also not sensible.
I remember there was a pressure group "insulate britain". Their aggressive tactics got them banned and arrested, and the idea was never heard from again. I sometimes wonder if that wasn't the intended outcome, a low-temperature conspiracy theory.
I'd forgotten about them, given the timing.
Thinking about who might benefit from it being a conspiracy, the only finger I can point at would be Russia? (Well, unless it's a long-term generational anger at the British Empire, which I have discovered is more of a thing than most Brits realise).
I had in mind someone closer to home: https://en.wikipedia.org/wiki/UK_undercover_policing_relatio...
(Different environmentalist group, different time)
You mean in the sense of deliberately discrediting "invest in insulation to reduce fossil-fuel consumption", with a small group designed to fail?
Alcohol duty, levies on cigarettes, gambling, sugar taxes etc are considered "sin taxes" and are certainly micromanagement.
“taxing the tool” makes me think of transaction taxes, like a tobin tax https://en.wikipedia.org/wiki/Tobin_tax
Well, fuel duty is a better example then
The issue I have with your proposal is that it discloses too much metadata to tax authorities in order to enforce compliance. They'll have an almost perfect map of the legal compute in their jurisdiction. Access to compute should be free to all and not gated by taxes.
Tax on electricity is already a thing. That can be adjusted and even be made progressive. Extra for fossils and so on.
> Maybe taxing a kWh of the AI data center energy consumption should be a thing?
That sounds excellent. Also water usage.
Really, AI has externalities and it should pay for it.
That would be a highly bureaucratic solution with significant overheads. Would everyone pay extra tax per kWh or just AI computers? Tax it on the producer or consumer side? How would you verify that a particular data center is "bad computation" and needs a different tax rate on its energy usage.
Should an AI data center from pharmaceuticals or biotech startup be taxed extra per kWh, even if the AI is purely used for medical research?
Just big AI datacenters. If this encourages people to run local AI, all the better.
> Should an AI data center from pharmaceuticals or biotech startup be taxed extra per kWh, even if the AI is purely used for medical research?
That's not a gotcha.. those are all policy choices. My personal preference is, yes, of course - medical research today is taxed just fine. If there's lobbying to specifically grant tax benefits to medical research, I can see an exception being carved.
You think multiple localised heat centres are more efficient than centralised managed heat centres. Why don't we all just have a coal-fired power station in our back garden?
I think the simplest explanation is also the best one. Like you said, it is very difficult to tax wealth.
I think we have no option other than taxing loans and other money movements like that in sufficiently large scale as ordinary income. If I get a loan for USD 200k for a house once a year, I think it isn't income but if ElMo gets loans worth USD 20M a year, every year, he should pay income tax on all of that as if it was ordinary income. How he pays it? I don't care. Sell some assets. Oh and that sale is also taxable.
Tax physical assets. Someone has to pay otherwise it gets confiscated by the government. Then exact ownership doesn't matter.
How do you determine the "value" or an original painting which the current holder acquired 40 years ago in for $X francs?
Raising money through taxing wealth is far easier than raising money through taxing income when nobody has jobs.
> We also don't let steam engines and carts pay taxes just because they 'replace' (=displace) human labor.
It is funny because in the copyright debate, AI is often treated as human. Like "we didn't steal your data, the AI just learned from it!"
They will use the analogy that’s most advantageous to them at any point.
We actually have "juridical person" in most countries. I think AI would be ideal for that
Just tax land.
Problem solved.
The problem is that rich people and large companies usually go to great lengths to avoid taxes, use loopholes or get special deals (and with great success). The missing tax income has to come from the middle class, who can't avoid it.
With increased automation, this only gets more extreme.
Surely if we can recognize this, an AI worthy of the name would be able to recognize this at scale, and what can be recognized can be remediated…
Or perhaps this could serve as a kind of test: a technology that cannot be reliably used in tax evasion enforcement simply isn’t worthy of the name AI.
Or perhaps it reveals that we have structural problems, and certain concentrations of wealth with or without automation are a threat to the just and effective operation of society and should therefore be as vigorously opposed as crime or foreign attacks.
"The missing tax income has to come from the middle class, who can't avoid it."
So somewhere along the line it could be very beneficial to be poor on paper.
Or are we going to blame these people for corruption while the (ultra) rich are doing this constantly?
"It's good to be the king!" (Mel Brooks)
> The missing tax income has to come from the middle class, who can't avoid it.
Taxes on labor are actually a method of extracting money form the rich capital owners.
As you mentioned it's easy for the rich people to hide their wealth and avoid taxes on its growth.
The one thing that was very hard for them to avoid or hide was purchasing labor which they had to do to enlarge their wealth. So governments taxed that.
If governments lowered the taxes on labor it wouldn't mean middle class would earn more. It would only result in capital owners paying less for work. They always pay as little as possible and how little a person is willing to work for is the same, tax or no tax. Because money in hand is what counts.
Of course since as labor is being replaced with automation this way of collecting tax on capital growth becomes less and less feasible, so things are bound to change.
Relevant: Manna
https://marshallbrain.com/manna1
Directly taxing AI is very hard. Imagine if a company had to pay taxes for every AI agent operating in the U.S. or the E.U. As if they were regular employees. Big corporations would simply move the AI agents to countries without taxes.
It's actually trivial. AI apis are pretty streamlined by now. Just slap a tax on processed tokens and you're guaranteed to reach every AI agent out there. It already happens everywhere with sales tax for normal products. Just treat tokens as the product and create an extra tax for it.
I don't think you responded to the main concern.
Let's say EU and US taxes AI tokens. India doesn't, so almost all prompting done by international companies now is outsourced to India, and still not taxed.
Or do you tax AI companies and tax tokens "at source"? Then, obviously, they either lose competition with foreign (let's say Chinese) companies that do the same but are not taxed, or more likely all AI companies move out of EU and US.
How will that work with local/offline agents? They are getting better and better.
Audits? Like it happens with licensed software. The issue is that if any country won't play ball with either not adding the taxes or by closing an eye, everyone is gonna put their datacentes there and become un-auditable.
I guess the other countries can slap sanctions on them, but the people benefitting won't care really.
Ohhh! Just imagine all the new IRS jobs and government powers that would be created!
You could tax the energy and subsidize it for individuals. It's the ultimate resource that all business uses. But that would mean unscrupulous countries could tax their energy less and attract AI farms. So probably you need to tax imported tokens (and other goods) as well. There could be many benefits of taxing grid energy instead of labor.
This is how sales tax already works. If you sell something to another country that has sales tax, you need to pay it irrespective of where you produced it.
Not only that, do you tax AI that doesn’t replace humans? How can you tell? Do you tax differently depending on how many workers it replaces? How do you measure that? Do you create exemptions for non-profit or humanitarian use? How do you measure that?
I can only image the Kafkaesque tax code the government would come up with. Then it would create all sorts of weird incentives as companies attempt to minimize tax paid.
Don't people give pretty much exactly this argument about all taxes?
Isn't this exactly what happens? There's a reason why most bigtech companies operating in EU are based on Ireland.
This is not a reason to stop taxing (i agree with most here that taxes should be higher), but to design taxes that can't be circumvented easily.
Well for starters, robots shouldn’t be tax deductible because you get a net deduction already from not paying wages, so you should pay maximum tax on their purchase price.
(Otherwise you would buy a robot.. tax deduct it, then pay less tax by not paying wages, which basically means humans would be paying tax to offset the cost of corporates buying robot to replace their own jobs which doesn’t seem fair)
Plus, they should probably add a 50% VAT or something like that on initial purchase, which covers displaced tax for at least 1-2 years and can help cover any initial teething issues or increases in social services.
I personally don’t think I can deal with living in a society where robots are so cheap that within 5 years or whatever there’s 2-3 times the human population worth of robots. Tax it all to hell, because that sounds maddening.
You know in an ideal world, maybe these robots don’t last that long, but they still end up slightly cheaper than workforce, so we just tax the hell out of them and give all the money back to the people as UBI and that’s how we achieve the UBI utopia.
Or maybe we treat them like motor cars and make people register them on an annual basis if they’re going to use them commercially… like $30k/year or something.
> maybe these robots don’t last that long
Landfills full of broken robots is totally something humans would do haha
Yep, if robots really become that cheap and widespread, it could dramatically shift the balance of power in society
By this logic owners of wheel barrows should be taxed for all the manual labour jobs the wheel barrow destroyed.
Exactly. This is such a silly argument. The article takes the argument "if a lot of jobs disappeared since they are now done effectively for free, what about tax revenue??"
It really misses the forrest from the trees. You're transported into a world in which efficiencies mean that much fewer people need to work, but somehow government services and entitlements are unchanged and we need to hit roughly the same percent federal tax receipts or ... what exactly?
Or people starve?
But ok look at it this way... What is silly about taxing a sector that is undertaxed because the current system assumed income taxes?
- social security
- healthcare
- armed forces
- road/utility maintenance
bacially everything funded by taxes
Or...infrastructure, public services and schools go unmaintained? How about the magic technology supposedly allowing for all of this efficency, all the while it imagines a human has six fingers, who will maintain that?
Also, if magical robot AI makes private operations more efficient, requiring less cost for the same or more amount, then it can do the same thing for government operations.
So, even more people out on the streets desperately trying to get their slice of survival by being sexually available to the equity lords? Because what else will there be?
> You're transported into a world in which efficiencies mean that much fewer people need to work,
It's a matter of perspective. I'm pretty sure that from their perspective those people very much need to work because they need to pay taxes, rent, insurance, food etc...
What mechanism is going to ensure that the increased productivity is going to result in lower cost of living for these people such that they no longer require to spend so much of their life working to survive?
> I'm pretty sure that from their perspective those people very much need to work because they need to pay taxes, rent, insurance, food etc...
That's a pretty Matrix "human-battery" level attitude to your fellow brothers and sisters. "They need to work to pay taxes, rent, and insurance". Ie, they only exist and are allowed to live to be serfs - or cattle really.
Corporations should be taxed on their profits, including profits boosted by the invention of new technology.
Yeah absolutely, and they shouldn't be taxed extra specifically for using a new technology. If people need a UBI they should be paid it off the back of all taxes (which should rise if automation is successful), not a specific automation tax. Saving jobs sounds good and it's an easy win but you end up with a stagnant economy where people are paid sinecures to do make-work, which is doubly harmful since the company has to pay extra for the employee, who is also deprived of being able to do some other job that would be useful to the economy.
They already have, significantly, around 25-35% in developed economies. The issue is that people often look at revenue, seeing company X earning $100 billion annually, and assume they should pay $20 billion in taxes. However, most AI companies today are not profitable and spend up to 100% more than their revenue on R&D and product development. I doubt they will turn a profit anytime soon, probably not for at least a decade.
Actually it's much less, big corps are using any possibile schema to avoid paying taxes.
Effective corporate tax rates were between 12 and 14% for the US, with some of the biggest corporations bordering 0%.
> They already have, significantly, around 25-35% in developed economies
The thing is companies and even self-employed individuals of a certain wealth level know how to "(ab)use" it. From illegal but trivial and hard to detect tax evasion to financing personal lifestyle by having the company pay for certain luxuries (cars, computers, furniture, etc.).
If you have the wealth to have a dedicated office that dedicated office can be your man cave if you justify it with having all sorts of amenities for customers. And good luck to whoever checks taxes to find out how exactly things are used/not used.
All of that usually means that companies, company owners and high ranking managers get away with not paying taxes for a lot of things that everyone else does simply because they don't have a say within these companies.
And all of that is before you go to the tax advisor.
I am sorry, but if you do hard honest work the chances of you getting rich are beyond slim. Even worse when you do something that actually benefits society.
They already are
You tax where you can not where you should. Corporations trivially hide profits. What they couldn't hide well was labor. You know what else they can't hide? Their power bill. It even works for companies that eternally operate "at loss" (which also parallels taxing labor).
> Corporations should be taxed on their profits
Hold on now, how will 'trickle-down' economics work then ? Think of the poor companies trying to provide a living for all those AI. /s
I'm not so sure this argument is valid. The invention of the wheel barrow created new jobs in wheel barrow manufacturing and distribution. On the other hand, the promise/threat of AI seems to be the complete displacement of humans in many industries without creating alternative employment for the vast majority.
Just to expand on this. The wheelbarrow increases the value of labor. It's not a good analogy.
It does lead to people loosing their job. If you have a pile of dirt that needs 3 people to move it with buckets but now 1 person can move the same pile with a wheelbarrow then the 2 others are out of a job.
Same as when one developer with AI can do the job of 3 developers and the other 2 are fired.
do you have stats on moving of dirt with buckets vs. moving with wheelbarrows? Or is this just an assumption you are making? I think probably an assumption because how often do people move piles of dirt without wheelbarrows nowadays so where would you actually have your data from?
In my anecdotal experience moving piles of dirt manually (for large piles of dirt) it is generally the digging up of the dirt that takes the most effort, if I had to move it with buckets or a wheelbarrow I would still expect that to be the case.
I would furthermore expect that there are some functions at work in modelling the moving of large piles of dirt using manual labor.
Your model may make sense with a small pile of dirt but I don't think you will find 1 remains and 2 go, at best 1 goes and you take a bit longer to move the pile.
Also, this is just my observations of having had large piles of dirt to move with manual labor (including wheelbarrows and several of those) As you scale up the amount of people you could drop by adding wheelbarrows goes down, because again the main problem is the digging. The wheelbarrows becomes a thing you trade off diggers on running. You will want to have more wheelbarrows that wheelbarrow users so that diggers can fill wheelbarrows while the users are running the already filled wheelbarrows to where the dirt is being dumped.
At this point then you would probably want to drop the wheelbarrow analogy and go to a backhoe and a truck, but then all of the various observations of the other flaws in the wheelbarrow argument become apparent, such as the factories to build backhoes and trucks, the training for backhoe operator etc. All leading to a relatively strong argument that existence of backhoes and trucks are a boost to the environment, potential job creator and those jobs will be more skilled jobs leading to higher wages in the economy.
you got papers for that bucket and shovel working on site today?
It increases the value for that one person who uses the wheelbarrow sure, but it does not raise the value of labour in aggregate. The same would be true of AI tools.
Taken to the extreme, you're arguing that tools have only lowered the value of labor in aggregate and that seems obviously false.
The value of labor is dependent on the demand of that labor and tools increase demand by increasing what projects can be done.
I did not argue the tools lowered the value of labour in aggregate - I merely said that they did not increase it. However, the effect on the individual and the group are different. If you have 10 people carrying boulders across the field, and you introduce a wheelbarrow, and now you have one person carrying the same amount of boulders across the field, the total aggregate value of labour has stayed the same. This particular person can certainly capture more of that aggregate value than they could have before, but the total value has not gone up. It’s also true that now you have lowered the cost of moving boulders across the field, so yes, there could be more demand for whatever it is you’re selling and that could mean that maybe you need two or three workers with wheelbarrows. but I think if you’re going to talk about the value of aggregate labor, you have to control for the amount of demand.
Wheelbarrows are pretty simple devices, I’m sure many people just made them on their own. But even accepting this point, there’s no particular reason why we should expect that every invention until now generated new and different types of work, just not this one. The people talking about complete displacement are selling you a story because it gets them clicks and sells books.
you think when the wheel barrow was invented it was obvious that new jobs would be created?!?
A little known economic fact – the wheel was actually invented billions of years ago by bacteria and reinvented by every species since. It’s just that they all held off using it until they could be sure that it would create jobs. Thankfully thousands of years ago, human economists finally did the math and let everyone know that it checked out!
The problem is that AI takes jobs faster than creating new ones.
That's unique in human history
The problem is that thousands of sub-stackers, journalists, and "thought leaders" have realized they can make a living writing a weekly think piece speculating that AI will take jobs.
Sadly not unique in human history.
Apples and oranges. Wheelbarrow is obviously limited in the types of tasks it can handle.
What about the wheel then? It's stolen plenty of jobs, not only from people, but from animals too.
By your logic wheel barrows could potentially replace >90% of all jobs.
AI is on track to being able to remove a society-changing amount of jobs, wheel barrows improved worker's efficiency.
Industrialization did replace 90% of people's jobs. And the only thing that happened was that people got new jobs to do.
Wheel barrows are not industrialization. hfs
A lot of them are bullshit jobs though. We've yet to see "AI" do anything actually beneficial. I don't mean the stuff that was done before the AI hype like categorizing bacteria, etc.
Watch the news. One crisis after another, so maybe that freed up work force and the wealth generated by "AI" should be used to tackle at least one of them.
Huge amounts of taxes and dedication of that money could be a first step.
Alternatively don't raise taxes and use the oh so great AI to tackle these issues. Should be trivial if you have ">90%" of all work freed up.
if the wheelbarrows drive, load and unload themselves, maybe?
social unrest must be priced in at this point somewhere
The folks agitating for “social revolt” are not people at risk of losing their jobs, rather it’s the same people who’ve been agitating for social revolt for decades - people wealthy enough to spend years in university reading critical theory whose financial security was never at risk, whether from wheelbarrows or robots.
To some degree we already do. Corporations pay taxes.
We, as a society, allow corporations to pull resources from the commons because the other side of it is that their existence provides a value through jobs and tax revenue and such.
If the equation shifts such that the benefits dry up, but the downsides only increase, why should we allow that?
The solution could be as simple as higher business taxes or as wild as universal basic income.
It could be something like all AI is forced to be open source, open weight, free at least as far as the knowledge parts.
There's certainly no God given right to exclusively benefit from an invention. We allow that for as long as we care to.
And there's nothing illogical about changing these decisions as factors change.
Indeed, there’s nothing illogical about adjusting tax rates and structures as things change.
I am deeply sceptical of the idea that 99% of us are suddenly going to be idle any day now, so I think endless think pieces on what we should do when that day arrives are kind of pointless. But it is certainly obvious that if it did happen, we would have to reassess how we do stuff.
This is utterly backwards and your false statement leads to a completely wrong set of inferences.
We don't let corporations do anything because they provide value through jobs and taxes. What company do you know that exists (beyond transiently) solely by paying taxes and employing people?
Companies are an extension of the individual, they exist to make money for the individuals that own them so that those individuals can acquire goods and services that they themselves need or desire.
How do companies make this money? Holding people at gun point and taking it is generally illegal; instead they resort to providing goods or services to some set of people who are willing to pay for them.
To provide these goods or services they need to employ people. The fewer people companies in aggregate can employ, the better for people in aggregate since those people can acquire "things" (food, jewellery, phones,...) for less of their own labour (or equivalent dollars).
If the "benefits dry up" as you say, people will stop sending their hard earned money to this company and the company will eventually cease to exist. Your fallacy was assuming the benefits were the jobs and taxes, not the goods and services provided.
Thank you, took the words out my mouth.
Nothing you said is really in contradiction with what I said, you're just looking at the why from an individual standpoint.
All of what you said can be true and also others can and do decide to allow or disallow a group to exist.
Corporations don’t provide goods or services: people inside them do. Corporations are a legal structure we allow to exist because it enables jobs and taxes.
Corporations don’t have to exist; they are a creation of society and thus can - and I think obviously- should be changed
Not even remotely true; corporations as we would recognise them today pre-date the legal system as we would recognise it today (and have existed in just about every legal system since).
Certain configurations of the corporation are described in our laws, e.g. "limited liability".
Allow to exist and creation are completely different.
Wolves predate towns but we choose to not allow them in towns.
Have you ever done anything together with a group of other people? That is a company. That's why they are called companies. They are a group of people doing things.
That has existed for millions of years already. First as hunting companies, then as raiding companies. It exists in other species as well. It will never go away. It has existed in every human society, no matter what political or economical ideology.
The real question is how companies should be organized and owned.
If you conflate corporations with any grouping of people, then they're the same as cartels, gangs, feudal kingdoms...
Clearly we're talking about a specific modern legal entity with a specific organization that, as you say, can change.
Okay, ban the corporation as a legal entity. And all other companies as legal entity so that they don't become an escape hatch.
It will not take longer than until sunrise next morning before all those corporations are now different single individuals who contract their whole company structure again and now have everything from job contracts to investor contracts in their own names instead, using probably the same kind of complicated contracts that preceded the modern corporation as a legal entity. What did you benefit?
It’s not about logic. It’s about humanity. We are losing.
1. No, we are not losing. 2. If it was true that we were losing, then tax revenue would be the least of our worries.
1. We are absolutely losing. Wealth inequality has never been higher in human history. How does a single human amass such wealth when his physical and intellectual output doesn’t even match that level of equivalent worth? The first reason is he scrapes it off others, and the second reason is technological automation. AI is just one bump in the road of technological innovation magnifying work output.
2. I never said tax is the end all be all of the situation. It’s one attribute we can use to combat AI take over and wealth inequality in the face of a multitude of solutions that can be executed. It is not consistent with logic as shown by the wheel barrow example and I am saying it doesn’t need to be. Understand?
This was an article about AI and income tax policy, but you’re making arguments about inequality.
I hope you still feel you arent losing when your job is gone and thus your income and woops there goes your home because you cant afford your rent/mortgage anymore.
Rent/mortgage would be dirt cheap if you didn't have to live near a job.
It's never been easier to live far from your job, yet rent/mortgage prices are higher than ever.
Boy I wish I lived in your reality.
Sure doesn't feel like it. Life's never been better for more people.
That’s because you’re rich. And all your friends are probably rich.
https://fortune.com/2025/11/07/what-is-the-k-shaped-economy-...
Many problems with the tax code and all of its complications is due to the fact that people are taxed on revenue and businesses are taxed on profit (revenue -costs). It would be good to remove this mismatch. I would prefer eliminating the income tax (land tax anyone?) but you could take business on revenue (a VAT is sort of like this).
This will destroy low margin business (ex Supermarkets?), they will be forced to increase prices. There is a million downstream bad consequences
Revenue has almost no relation to the ability to pay. There are plenty of businesses making 1 or 2% profit, often because they have high pass through, like distributors of all forms, including supermarkets and stores.
I’d rather figure out how to stop taxing people and place the burden on companies entirely. Make it progressive like income tax but make it based on revenue not profits.
If they are subject to taxation, must they also have representation?
"In the United States, for example, about 85% of federal tax revenue comes from labor income"
That's the problem. AI has the same tax problems as corporations. But US corporate taxes are historically very low and easy to evade.
It should have come from wealth and assets instead.
The world's richest elites have managed to evade many types of taxes, using loopholes in tax laws and by controlling government policies to make them more beneficial to the ultra rich.
In many of the world's richest nations, the wealth inequality has become super inequality.
And for the ultra rich, the recent pandemic was a boon, not a bane. This pandemic was the best time in history, if you are a billionaire.
* World’s top 1% richest elites own more wealth than 95% of humanity, says Oxfam.
* The top 1 percent richest own 43 percent of all global financial assets.
* Despite being home to 79 percent of the world’s population, Global South countries own just 31 percent of global wealth.
* According to Oxfam, the fortunes of the world’s richest people increased as much in the span of 24 months (2000-2021) as they did in 23 years. Now the bottom half of the global population would have to toil for an estimated 112 years to earn what the top 1% now rake in over just 12 months.
* “The pandemic—full of sorrow and disruption for most of humanity—has been one of the best times in recorded history for the billionaire class.”, says Oxfam.
* The world's richest people significantly increased their wealth during the pandemic, with two-thirds of the $42 trillion in new wealth going to the wealthiest 1%. Billionaires got 54% richer during pandemic. This surge in billionaire wealth occurred alongside rising poverty rates, as many individuals faced economic hardships due to the pandemic. This has raised concerns about money flowing to the well-heeled instead of to services for those hit hardest by COVID-19. It also points to broader potential implications for a sustainable reset of the global economy.
* Less than 8 cents in every dollar of tax revenue collected in G20 countries comes from taxes on wealth, says Oxfam.
* Oxfam found that the wealthiest 1% of the world population emit as much carbon pollution as the poorest two-thirds of the entire human population.
* “Only 0.4 percent of the world’s largest corporations are publicly committed to paying workers a living wage and support a living wage in their value chains”, Oxfam wrote.
* Oxfam likewise discovered that seven out of 10 of the largest corporations on the planet either have a billionaire as their CEO or have a billionaire as their principal shareholder.
* The world's richest people have significantly increased their wealth, with the top ten billionaires collectively adding over $500 billion to their fortunes this year, largely due to the booming AI sector. As of now, their combined net worth is approximately $2.5 trillion.
* 148 top corporations made $1.8 trillion in profits, 52 percent up on 3-year average, and dished out huge payouts to rich shareholders while hundreds of millions faced cuts in real-term pay.
* The world’s richest 1% own 43% of global financial assets, and the wealth of the top five billionaires has doubled since 2020, while 60% of humanity got poorer, according to a report by Oxfam.
* The five richest people on Earth in 2023 were Elon Musk, Bernard Arnault, Jeff Bezos, Larry Ellison, and Warren Buffett. Their combined wealth skyrocketed from $340 billion in 2020 to $869 billion just three years later. Adjusted for inflation, this was a real increase of 114%.
* Every year, America’s richest citizens paper over their earnings with losses and use other creative accounting strategies to shelter their fortunes, as the tax code allows them to do. As a result, the country’s billionaires pay lower tax rates than many of its millionaires do. Indeed, they pay lower tax rates than many middle-class professionals.
* Elon Musk, the world's richest man who's on track to become the world's first trillionaire, hasn't paid income tax for years.
* Many of the wealthiest individuals in the world, including billionaires like Jeff Bezos, Elon Musk, and Warren Buffett, Mark Zuckerberg, George Soros, Michael Bloomberg have been reported to pay little or no federal income taxes, due to legal tax avoidance strategies.
* Shockingly, the Billionaires in the U.S. pay a smaller tax rate than most teachers and nurses.
* ProPublica has obtained a vast cache of IRS information showing how billionaires like Jeff Bezos, Elon Musk and Warren Buffett pay little in income tax compared to their massive wealth — sometimes, even nothing.
* According to leaked tax returns highlighted in a ProPublica investigation, the 25 richest Americans paid $13.6 billion in taxes from 2014-2018—a “true” tax rate of just 3.4 percent on $401 billion of income.
* A new Oxfam analysis shows the wealth of the 10 richest U.S. billionaires increased by $365 billion in just 12 months, based on data from Forbes.
* According to a 2021 White House study, the wealthiest 400 billionaire families in the U.S. paid an average federal individual tax rate of just 8.2 percent. For comparison, the average American taxpayer in the same year paid 13 percent.
* The Tax Cuts and Jobs Act, Trump’s signature first-term domestic-policy package, helped these billionaires keep more of their money. The One Big Beautiful Bill Act, passed this summer, extends the TCJA’s tax cuts, creates new business loopholes, and lowers taxes on estates. To help offset the revenue losses, the Trump administration is stripping health coverage from millions of low-income Americans and shrinking the Supplemental Nutrition Assistance Program. The rich, including Trump, will keep getting richer. The poor will pay for it.
Sources:
https://www.oxfam.org/en/press-releases/worlds-top-1-own-mor...
https://www.oxfamamerica.org/explore/stories/do-the-rich-pay...
https://www.propublica.org/article/the-secret-irs-files-trov...
https://itep.org/tax-day-billionaires-wealth-inequality-corp...
https://www.theatlantic.com/economy/archive/2025/08/billiona...
https://www.oxfam.org/en/press-releases/wealth-five-richest-...
https://geopoliticaleconomy.com/2024/01/18/billionaires-rich...
https://www.oxfam.org/en/press-releases/less-8-cents-every-d...
https://www.weforum.org/stories/2020/10/the-rich-got-richer-...
https://www.marketplace.org/story/2023/01/16/how-the-worlds-...
https://fortune.com/2022/05/23/pandemic-billionaire-wealth-o...
https://www.cnbctv18.com/world/wealth-of-worlds-top-10-billi...
https://www.businessinsider.com/10-richest-people-ai-boom-te...
Perhaps some sort of tax that looks at the ratio of a company's profits (or perhaps revenues) to employees, and the tax scales up if that ratio gets too high.
Arguably, a "public good" that companies provide is employment, and as they increase automation, they reduce that "public good" and direct more of their revenue to themselves rather as salary for their employees.
The tax should also go to fund a UBI.
Agreed. Essentially it's either you create jobs directly, or you contribute to the UBI fund.
Depends on whether they intend to let all of these out of work people who were unlucky enough to be born as a worker starve to death really. They are going to have to find a way to give people a life even if there are no jobs or the paperclip creation doesn't have any buyers. Anyone proposing to just leave a decent percentage of the country to just die is going to face stiff opposition.
Elon Musk hasn't taken to counting his Optimus bots in units of "legions" because he intends to let peasants tax him for ubi.
The answer is, no, just tax land value.
Henry George, and David Riccardo before him, figured that as productivity and thus wealth increases the value accrues to the land owners, not capital not labor.
This is because Land is the fundamental bottleneck of human activity, the core finite resource. And as everything else gets more productive, the land itself becomes more valuable.
So, yes, tax Land, and redistribute as a dividend to all citizens. After all, no one can be credited for building that Land.
200 years ago that was true, now it's easier than ever to run a business with zero land.
All this discussions about 'machines paying taxes' and 'basic income' is just a way of avoiding the obvious question, that is: 'who owns the means of production'?
If machines can make all the work, then, who owns the machines is the only relevant question.
No taxation without representation. AI Boston Tea Party follows. Leading to a new AI run nation aka Skynet...
Companies in western democracies usually pay tax in addition to their workers and owners, but don't have representation in parliaments separate to that of their workers and owners. Questions about whether robots have the right to vote has more to do with their humanity and less to do with their tax liability in such societies.
At least for the time being, AI "workers" belong to someone. That person is represented and pays taxes.
That's peculiar, every single robot seems to have voted for the new Musk Kill All Humans Party. Oh well, that's democracy in action.
As long as they start with the titular character that's a fair end to the species
Chances are half of humans would vote for it too
Fundamentally we need safety valves for labor supply that always creates a net advantage for workers, but how? My take has always been that advances in productivity that reduce the need for labor should be given back to the workforce via incentives like:
- sabbaticals/funded retraining opportunities: People leave to train creating a need for labor and at the same time increasing the value of labor. This would also create liquidity in the labor market since people would have opportunity to leave their current field and go to a different one.
- strong encouragement to retire earlier: Fewer people in the workforce and more people spending retirement means more demand for jobs and more demand for goods and services.
- limit the workweek more: Same argument as retirement
All of these have positives and negatives, but unless we start thinking about things like this we will get a world where labor is at a massive disadvantage and all the issues that leads to.
Wouldn't higher productivity also lead to higher profits? Which then should be taxed accordingly?
Only if the increased earnings are treated as profits. Amazon famously had zero taxable profit for, what, decades?
Amazon didn’t pay zero taxes, robbing the commons. Amazon engaged in trade and investment, taxed on all sides and at multiple points in the exchange of goods and services. Then Amazon invested their profits into further tax-creating transactions, reducing their tax burden that year.
When Amazon stopped investing and started extracting those profits everyone paid taxes on that giant money pile that wouldn’t exist without the investment. Every Amazon worker, CEO included, paid taxes all along. Amazon’s service providers and partners did. Amazon now does too, and the tax coffers have won big.
Taxation offsets from investments should be broadened (to individuals), not shamed.
...creating a huge amount of value for customers and shareholders, and now pays far more tax on far more profit.
The people that most need wealth redistribution aren't the shareholders of the company, they're the employees of the companies that Amazon displaced.
No. Corporate profits, especially when forwarded to shareholders, are very difficult to tax. Several companies that pay virtually zero income tax (apple, google, amazon) also now sit on piles of cash, piles so big they honestly do not know what to do with it. Thats where all the AI cash is comming from. They need somewhere to spend thier post-covid winnings.
The real question isn't whether AI should pay taxes—it's whether we're even asking the right questions about what 'work' means in 20 years. Taxing AI is like taxing electricity after the industrial revolution. We didn't tax the looms, we restructured society around abundance.
The optimistic take nobody wants to hear: if AI genuinely replaces most knowledge work, we're not looking at a tax problem, we're looking at the first real chance to decouple survival from employment. That's either utopia or dystopia depending entirely on whether we're thinking in election cycles or generations.
Will include this link in my next issue of https://hackernewsai.com/
Replacing workers has been going on for many years, just ask mineworkers, factory employees, and many other workers. It seems that here on hackernews we're happy if this happens when it bring down prices and doesn't impact our jobs. But once it starts effecting software engineers it's the end of the world?
I do see and agree with the dangers of AI, but it would have been a bit less selfish if we'd been this concerned when other jobs got replaced by automation.
What you're asking is equivalent to asking whether capital should pay taxes.
I used to like the phrase "that idea is deeper that it first sounds", but Enron Musk ruined that for me.
No, "AI" is software, and software is a tool, and tools aren't people that should pay taxes.
You wouldn't charge your CNC Machine taxes for the productive labor it produces that could have otherwise been done by a dozen blacksmiths.
By all means have corporate and sales taxes pertaining to the owner of said tools though. Even as a right-leaning individual, it's become pretty clear to me that corporations pay too low in taxes compared to the broad 'middle class'. Corporate tax cuts don't help the common man. An extra few hundred in their pockets each month certainly would though.
Nations that keep placing obstacles in the path of AI (e.g. taxes) will lose to nations that don't.
Ask yourself if this is a race you're willing to lose
I've seen this statement before. I'm not sure why my nation winning AI, whatever that means (first to AGI?), is better for me than some other nation?
If someone can’t find work they probably don’t care about the global consequences
Nations that wholeheartedly embrace AI and destroy their economies won't survive very long when all of their citizens are out of work and too broke to afford food or housing.
The nations that survive will be the ones that control the use of AI.
And to be quite blunt, any comment that suggests that AI is relevant to more than a handful of jobs doesn't understand how the world actually works.
Of course not, otherwise the rich wouldn't get richer and that would be bad for power consolidation. Everything is moving into this direction, so why should it be different with AI?
We had this discussions for years with factory machines, and nothing came out of it. Don't get me wrong, I hate having taxes for everything (living in Germany with ~65% total tax strain for me if you include everything), but this is about power and stealing other peoples work.
It would be great if we stopped talking about “AI” like a sentient monolith. AI is not one thing. It is a set of methods for solving tasks with a computer.
Instead, it should be called “automation”. If we do that, it’s immediately obvious that this article doesn’t make sense. Should automation pay taxes isn’t even coherent. The obvious answer is, those using automation pay taxes, and should continue to. Perhaps at an elevated rate to compensate for the social costs.
Gaines in efficiency is probably the number one thing that can’t be effectively taxed long term. Perhaps it could be possible to tax a specific process but even then the incentive to create loopholes would be immense, since the process is already porous those who can effectively avoid the tax make more money to invest back into making more loopholes. If we can’t stop such corruption when it is subsidizing less efficient industries that waste much of their surplus on their inherent inefficiencies how could we expect to stop it when it’s subsidizing more efficient industries.
Additionally the improvements in technology enables vertical integration at much lower scales and this means there is left surface area to tax, cheap raw goods go in, cheap refined goods come out. This already scales down to such an extent I DIY many personal projects with CNCs, and by leveraging services like Send-Cut-Send and PCBWay I can build all sorts of stuff that I otherwise would have spend 10x more on. Instead of having to earn more money that is taxed in order to purchase it I can build it as a hobby. Increasing the tax on the pipeline on purchased goods would just increase the proportion of projects that are more economical for me to make. My hobby would make money if I sold the items, but since they’re for personal use this does not get taxed.
Something unusual about the AI revolution is that the increase in productivity does not appear to be mirrored by an increase in consumption. More of what people consume is entirely digital, many people spend their lives scrolling TikTok and they do appear to be satiated. Sure there is a data center boom but I think that’s more of a mania and is going to end up over built.
The computer and internet revolutions are still slowly propagating throughout the world, there are still many technological gains to be made here and I think one of the limiters to adoption is the lack of available tech talent in the long tail. AI is different as it requires far less tech talent to use and additionally makes it easier to take advantage of the computer and internet revolutions. Not only can it propagate without the same limiting factors but it facilitates the propagation of the other revolutions at the same time.
Don't the subscriptions on AI services charge VAT? Do the AI companies pay corporate taxes?
But as others pointed out, this is a silly anthromorphisation of AI - it's a tool, just like any software, nothing more. Tax the companies for sure, but don't treat LLMs like people or human-like entities. There's generations of automation tools that should be taxed as such, otherwise.
That "AI is just like your coworker / friend / companion" view is intentionally created by people who need the bubble part of AI to go as far as possible.
I only know about this TED Talk because it was in a mandatory training course for my work, but these is the kinds of things being said: https://www.youtube.com/watch?v=KKNCiRWd_j0 (he's trying really hard with the Steve Jobs look)
It's important in a democracy for people to pay taxes, it includes them in the system in a way that doesn't exist in a place like Saudi Arabia. We shouldn't aim for a bread and circuses society, but for one where we aggressively commoditize technology for the benefit of everyone.
There could also be a moral case for dropping taxation on industrial inputs altogether, and tax solely on the outputs. That would mean zero rating the labor input. No more income tax or income related welfare tax, which this article posits will be dropping away anyway as more automation arrives. Instead, the outputs of the economy would be taxed.
Revenue would then come from the consumption of economic output via a sales tax, most likely a new, progressive tax based on your annual spending rather than a flat percentage of every sale. It could be applied on the manufacturers profits via corporation tax but taxes are for the benefit of actual people so I’d lean on the former rather than the latter. The more you rely on corporation tax the more vulnerable you are to international shenanigans.
How would you feel if your take home pay nearly doubled but you had to pay X% of your credit card bill to the taxman?
When I was young I imagined a future where nobody had to work because computers and robots could do it all.
the issues is that work, salary was also an indirect way to structure society. want more, think more / work more (or be more cunning). now what we can't use that parameter.. how do we decide
I imagine this future could come true, if we're willing to accept that there would be many fewer people.
Just distribute the fruits of the automated labor.
The robots and automations are like the trees and bushes from our gatherer's past.
People would just take what they needed. No one would say: you are not allowed to take a berry from this bush because it's mine!!!
This would require some pretty huge cultural changes. People's modern sense of fairness, duty, and competition feed into stratification and instinctual tribalism.
We could just make more robots instead. If the robots are building robots then there's no barrier there.
Why is the utopia predicated on less people?
Well, we’re in a future where everyone still has to work to live, but the robots are taking the jobs instead
On the plus pole of the circuit the government prints the tokens and spends it on the things it wants done. On the minus pole it pulls the tokens via taxes. This is a means to compel the population to do work (pay taxes with tokens else jail, only way to get tokens is to do work). The idea to tax work is an economical oxymoron.
One of the big questions about AI is whether it will, like typical advances, create more jobs than it destroys. If it doesn’t, our problems are going to be bigger than taxes.
AI can't pay taxes - but there's a fairly short list of names of people who should be paying taxes to offset the costs of AI.
Progressive tax on resource consumption, this is what a tax system for the next millennium looks like.
This question is weirdly wrapped up in how robots are perceived, and how humanoid robots are propelled by hype about replacing humans. Robots that are actual industrial capital equipment already pay property taxes. Unless of course the state or municipality has been bamboozled into giving up those property taxes for the sake of jobs that robots are eliminating. That's weird.
If AI replaces workers, we wouldn't have an economy. It would probably be the end of capitalism. Or at least the end of the consumerism driven capitalism that we have known since the end of WWII. I don't know what would follow but it probably wouldn't be pretty. Honestly at that point, I could see the end of humanity. If truly we get to the point that machine intelligence is more capable and people are entirely marginalized then it's game over. At best a few human specimen end up on display in zoos, but maybe machines might not even have any use for zoos, since they can just share "experience" digitally.
If AI replaces workers and pays taxes, should it also vote and receive social security?
Also health insurance in the sense like repairing damaged components and robotic parts replacement.
If corporations are considered "legal persons", when they break the law, should they go to jail? If a corporation was forced to shut down because of law breaking, which would be a terrible burden to the workers and the customers, would that lead to corporations becoming more responsible "persons"?
https://www.npr.org/2014/07/28/335288388/when-did-companies-...
This is making it more complicated than it needs to be. You can tax things any way that funds collective expenses but doesn’t disincentivize economic activity ”too much”.
Theres nothing special or holy about income tax. If there’s no more income to tax, that burden gets shifted to corporate tax in some way. Whether it’s across the board or something more fussy like “taxing AI” is just implementation detail.
Agreed, we should have ATM machines pay taxes, and internet pay taxes for replacing stockbrokers and travel agents...
The fundamental change we need is to make corporations pay taxes on revenue (top line) and not on profits (bottom line). It's simple, easy to track and in par with income tax of regular people.
"The gains in technics are never registered automatically in society: they require equally adroid inventions and adaptations in politics; and the careless habit of attributiong to mechanical improvements a direct role as instruments of culture and civilization puts a demand upon the machine to which it cannot respond."
- Lewis Mumford, Technics and Civilization
It seems to me that since AI is built on the collective works of the workers it's replacing any profits should probably be taxed at 100%
In paradise, the unemployed pay taxes for being unemployed to the owners of "AI" systems. :*
Does automation use generally pay taxes?
Should Amazon pay taxes for using factory robots in lieu of people?
Should fabric manufacturers pays taxes for using automated looms instead of hand weaving ?
Even if lawmakers wanted to tax AI, how would they do it? How do you measure the AI usage level at a company, or the number of workers it has displaced?
That's what Bill Gates proposed [0].
[0] https://finance.yahoo.com/news/bill-gates-wants-tax-robots-2...
Tax everything the company produces/profit more and reduce the tax on the human workers.
Sir Leon Bagrit covered this topic in the first BBC Reith Lecture and it’s worth a read/listen if you’re interested in this topic.
https://archive.org/details/ageofautomation0000sirl/mode/1up
https://www.bbc.co.uk/programmes/p00hbdmj
I think ignoring AI, some Tax formula could be found that uses the number of employees in a company compared to some measure of the economical size of the company.
(With the goal of pushing the company to create jobs proportional to its scale, or pay an additional Tax equivalent to the number of employees they could've payed for)
Should AI also pay rent, mortgage, healthcare insurance, auto insurance, etc? Whatever workers make goes to rent/mortgage/insurance. A tiny percentage of workers save for retirement. Now everyone becomes a 'retiree' without monthly allowance.
To what end? The government cannot take care of its unemployed already, why should we believe any kind of “AI tax” would be effective?
The Venn diagram of {people that are ok with paying taxes} and {people that will own the technology that replaces humans that pay taxes from their income} is probably going to show such a small intersection that... UBI or whatever is the flavor of the month will not be feasible.
Haha this is the problem, we're taxing work instead of taxing wealth.
If AI is generating wealth for someone, should we tax it?
It'd be hard to tax them now since most of them are bleeding cash. I suppose you can go after Google, they make a ton of cash.
About as reasonable as the time a dog was CEO of Twitter.
The real question is if AI replaces labor, what will keep democracy in place?
People who advocate for things like UBI don't seem to realize that when voters don't have a share in the productivity of their nation, they become 100% a liability. The reason democracy persists is that the powers that be aren't incentivized to destroy democracy as it would harm them too. In 10 years that will no longer be the case. Arguably, you can already see this today as the future expectations affect the present.
https://archive.ph/trS1i
AI is not replacing workers. It might automate a few steps in a workflow, which require dealing with natural language, image content or applying knowledge from the web or internal data stores.
It enables a bit more automation of work than it was possible earlier. Automation alone did never reduce jobs significantly.
If you take the ambitions of robotics and AI companies seriously then what they are trying to create is the equivalent of unleashing 100 million cloned copies of the smartest and most well adjusted people you know upon the economy at a fraction of the cost. If they succeed it would absolutely reduce jobs significantly. In fact, its a little hard to imagine how the average Joe would have any economic value at all.
Amazon website is equivalent to 100 million cloned sales people who work at retail shops. It didn't cause global unemployment.
When was the last time you went to the mall? If no retail shops around you have closed down, I'd be surprised. The effects will take forever to reverberate through, but it's not like Amazon hasn't had an effect on the job market. Instead of being sales associates there's now Amazon warehouse workers. Instead of human copywriters, there's human fact verification as a service.
I see AI replacing workers, but maybe it is my circles. Most of my SaaS selling friends; these are long term, as in 20+ year solution sellers in ERP, HRM, trading, banking in certain niches therein making very good money, removing most of their staff while delivering faster and better with the few senior core people they kept. Junior/Mediors can please go away...
Seems to me there are way fewer farmers per capita and yet much more food produced, thanks to more & improved capital use in farming.
And where did the farmers go? The children of farmers were absorbed into jobs that were created for automating the farming and other industrial work. Farm automation did not cause unemployment overall.
> Automation alone did never reduce jobs significantly.
Unless you mean "all jobs across the entire economy", this is pretty obviously false. People used to weave fabrics by hand, make screws and nails by hand, bake bread by hand. These jobs hardly exist anymore.
Of course this did not imply that all jobs disappeared and the economy collapsed. But the sense in which "AI is not replacing workers" is contingent on specific features of software development, not about automation in general.
I did mean "all jobs across the entire economy"
But that suggests that if AI were to displace all programming ever, then as long as there were still some jobs, you would still consider that "AI is not replacing workers". Does that not stretch the meaning of "not replacing"?
It won't cause significant global unemployment. People would be doing some garbage work and still getting paid, instead of a desk-based white collar work.
If the AI is autonomous and self-directed, sure tax the AI. If they are used as a tool owned and directed by a person or company, tax them just like we tax Ford rather than each robot currently on an assembly line.
Should you pay more personal taxes because you do the job of three other people because you use better tools?
Around the world, every country should be allowed to make 'money' for specific cases like for teacher salaries, ... so that most people are able to work for the state or for our community.
Everyone works less, everyone works better, we will then see how much humans we still need.
So.. communism? That hasn't worked out too great in the past.
Uncontrolled capitalism hasn't worked either. Controlled capitalism brought us were we are today: Huge inequality around the globe especially in 3th world countries like the USA and destruction of the whole ecosystem we live in.
Communism didn't look great next to capitalism (east europe vs. west europe) but those people were also happy.
My idea is not communism though, its a 'if you do beneficial things for society, we have resources for it'. If you are teaching kids, we the planet have resources for you.
If you take care of kids, we the planet, have resources for you.
Lets call it Civic Duty Dividend or Care Standard or Public Service Money.
> If you take care of kids, we the planet, have resources for you.
That sounds nice, but who is going to decide exactly which behaviors to reward and by how much?
To avoid grift and corruption, we should probably have everyone vote on it in some kind of democratic process, right? Well that's basically what we have today with municipal elections, and looks like the consensus is we actually don't want to pay teachers all that much.
We already talking about a hyposisis that AI replaces workers.
I don't think i have the choice of changing the world with a hn comment.
>Communism didn't look great next to capitalism (east europe vs. west europe) but those people were also happy
Which people were happy? Nobody hates communism more than Eastern Europeans. I don't know a single elderly (i.e. lived through communism) person in my country who doesn't hate communism. I think you have a rose tinted view of how communism worked out on Europe.
Plenty of people were 'content' enough and had a normalish childhood.
I don't want to romantesize it though.
GNU and BSD-licensed software code has replaced a measurable amount of codes, as various companies no longer need to duplicate effort - should GNU be taxed? How?
Is GNU getting income by replacing human-made work ? GNU and FSF are nonprofit organizations providing free software to people.
It's the kind of organization that could be financed by taxes on AI mega-corp.
This article is actually a veiled, but sensible argument for less income tax and more wealth tax.
To me it reads like a (sensible) argument for taxing the income of a corporation equally to the income of a human.
Government replaces workers with regulations, should it also pay taxes?
I dunno, should we incentivize the government to liquidate the workforce?
Should my washing machine pay income tax, and does that mean I need to register as a business to have it as an employee? So many questions raised by the automation of previously human-performed work.
This is why there should be no income tax. Only corporate taxes and VAT / sales taxes.
AI may replace some workers, but it won't replace the worker. Rather it will augment the worker. Even in software, where people are acting like recent graduates are having the ladder pulled up from them, I think this is just a lack of imagination. The same arguments could have been made of IDEs, debuggers and StackOverflow, but the industry isn't stupid. It still recognizes the need to learn and mentor actual human contributors. Whether we're in some hype-laden cycle or not, this is the truth.
As a young software engineer with a lot to learn, I would have been better off with ChatGPT or Claude than I was with experts exchange, reading manuals and banging my head on the wall until something worked. Often the SDKs I had to work with were inconsistent, buggy or required unsafe/undocumented features to accomplish basic things. I would not categorize the time I spent struggling with those arcane tools as productive learning. It was just "shit we had to deal with" to do the job.
So today, if you are a young engineer feeling like you are way behind, feeling like an imposter, feeling like you can't catch up to the industry: welcome to the club. I've been doing this for 20 years and those feelings are never far away. Instead of trying to lean on LLMs as a crutch, though, use your imagination! The tools we have now are what make us so much more productive. Use them, but don't let them use you. If you are learning especially, write the code, and let the LLM critique your work. Otherwise, give the LLM problems and ask it how it would solve it, and learn about the concepts that come out. Treat it like a Google search that just works way better and (for now) has no ads.
It's literally the same argument as how to use IDEs. The more you understand what it's doing, the better you will be at your job.
I'm more interested in whether we even could make "it" pay taxes.
Suspect we're at a point where any single gov would struggle to control the megacorps. Not just big tech, but in general.
Labor "power" is paid, thus hours put in mostly. Hard to compare with AI. Simpler and fairer (for a start): Tax capital gains as soon as assets are used as collateral for loans.
We don't want a rebellion sparked by 'Taxation without representation'. Do we?
If all goes as assumed in this thread, there will be more taxes because there will be higher profit margins at the corporate level.
I think this is very silly. I dislike the whole AI hype as much as any other. But by that standard you could also ask "Should Photoshop also pay taxes?" or "Should printers also pay taxes?"
If we are oh so productive that people can make oh so much money then A) finally do collect taxes from wealthy people/companies/families and B) use those taxes to do obvious things that benefit everyone including the wealthy, like good infrastructure, healthcare, stuff that creates a stable society and seduction to face all the big problems that exist.
There are huge problems in every country and since the claim of AI is gonna create so much more productivity and wealth we should make use of the freed resources to finally tackle them instead of pushing everyone into dumb bullshit jobs.
We live in a world where rich people (and it doesn't really matter which country) use their companies to essentially live off taxes. "Oh that computer/car/jet/travel/video game/TV/house/...? I need for work. Look I have to fly to customers and oh I also have that social media thing for advertisement". Oh and then they claim they'll just leave the country if they have to pay taxes which would be oh so bad for the country they don't contribute much to.
And then the employees are essentially asked to pay the taxes to compensate. For them tax reduction means that they have to pay for things like infrastructure that largely benefits corporations themselves. But hey it looks great on the paycheck when the money you have to pay anyways isn't subtracted.
If the telephone replaces errand boys, should it also pay taxes?
Taxes are paid by people and legal entities, not tools. The real issue isn't that machines aren't taxed, it's that our tax base is still heavily tied to labor
Whether it should or should not pay taxes is irrelevant.
Will it pay taxes? I think you know the answer.
We've never taxed robots for the employees they replaced in manufacturing.
If AI doesn't replace workers, should workers that use software to be more productive pay more tax for using a smarter software?
No. It doesn’t make sense. Should we charge taxes to our dishwasher? People, especially non-technical people, seem to be embellished by the words “AI” and forget that that’s not more than a mathematical and computational process that seems like an intelligent being.
Funnily enough, the leader of the Sumar political party (junior member of the socialist government) was ridiculed by her words about AI (some weeks ago):
https://www.elliberal.cat/2025/11/19/yolanda-diaz-hace-el-ri...
Yes, but they only count as 3/5 a person.
If I were a hedge fund shorting AI, I would nod and promote the message of this article.
“Boo capitalism” on the outside, AI personhood on the inside. Actual agenda: disposable moral vehicles. AI liability is the goal.
A tax on corporate profits is a tax on cost cutting already.
A tax on “AI” is a way to compartmentalize. But you can’t, and you shouldn’t.
First, you won’t be able to formalize which gains are “AI” and which are not. Is it deep learning? If so, a gunshot detector is taxed and a McDonald’s touch screen is not. Is that what you want?
Second, a host of labor savings that don’t look like “robotics” or “AI” are also not covered. If you increase the MTBF on a traffic light, you cut the labor of light replacement. Is this morally different than a McDonald’s kiosk?
What about the traffic light itself? Shouldn’t that be a cop with a whistle?
We can do this all day.
I don't think it's overly complicated. We could create a corporate tax which inversely factors human salaries in relation to created value/profits. It's not an AI tax, but rather an automation tax. Since salaries are taxed, it seems sensible to divert those losses for the collective elsewhere. After all, robots are ultimately not consuming any goods or services with personal income. The profit has to come from somewhere. Along the distribution of resources, collective infrastructure and social services need to be maintained and payed by taxes. You could alternatively tax the money spent, but this creates wrong incentives, I think, and the burden would be unfairly distributed (e.g. everybody has to eat about the same amount). As long, as we don't have something like universal income/wealth redistribution, "efficiency" in automation is parasitic for the collective and shouldn't be incentivized by essentially tax cuts. As long as the collective's needs are met, it doesn't matter if humans or machines did the work.
Basically if you got a business which creates a certain amount of value, the collectives' total tax income (considering possible employees' income tax) should be the same, independently of people employed and paid. 500M profit from fully automated web hosting should result effectively in the same collective tax income as 500M profit from a factory employing 10K people.
Note: I am throwing all "taxes" in a bucket. E.g. humans need health insurance, therefore the fully automated business tax needs to reflect these costs too.
> I don't think it's overly complicated. We could create a corporate tax which inversely factors human salaries in relation to created value/profits.
That would be extremely complicated. And would of course be corrupted to the core by all kinds of different parties seeking to benefit from it.
We tried nothing and we're all out of ideas. Clearly, the current system is bad, but it's the best system possible! Let's take the corruption we know, over the unknown possibilities. Who knows, through hard work, one day you could be a billionaire too. Do you really want to sabotage your future like that? Sound a lot like communism, and you are not supposed the make a living off minimum wage anyway.
I was just kidding, of course you are right, and this is the only way to a splendid future!
First implement federal and state law that requires every worker performing any profession to have a college degree in that field.
Then companies are evaluated on how much work is produced in their business (for example by revenue), and they have to either contract the equivalent number of people with those industry-specific college degrees, or even better - license the degree from a college graduate. This can also be used to pay for tuition. The student gets a mortgage that pays for her education when she enters college, and then the lender has the right to part of either her salary, or the licensing fee for her degree to companies that need it, or to people who need it.
Let's say a chef who hasn't gone to culinary college, he can pay a culinary college graduate 20% of his salary to use their degree, which is a professional license. Or a company needing programmers. They can hire immigrants or an AI to program, and pay licensing fees to computer science graduates who have the degree.
Think what I thriving market for banks, investors, and insurance companies! They will be able to package these licenses and offer them on the market to individual workers or to companies for competitive and efficient rates. The college student of course gets rewarded as well, as they can rent out their degree, or even sell it. So a good student can get several degrees, and have a very good income from both his own work and from degree licensing fees. Of course we'll make sure that students belonging to an oppressed class be allowed to license their one degree to several places at the same time.
Banks could lend out money to students, with the future college degree as security. After graduation, the student either gets a job that requires that degree, or licenses that degree to another person or to an institution which collects degrees and licenses them on one or several degree licensing marketplaces. Most would use these third-party re-licensers to simplify the paperwork. For example when a company needs to license a degree for a temporary project of just a few months, or when a degree holder takes leave from their own job for let's say three months. Then she can have some income from renting out her degree during that time.
I'm sure you've already thought about the problem of students who have mortgaged their future degree, but do not graduate for some reason. What happens to the money the bank has invested? This problem is mitigated and solved by packing these degree mortgages into Credit default swaps to hedge the risk. Since most students will graduate and be a return on the investment, we will pack all degree mortgages into investment funds, and offer them on the international financial markets, with sophisticated leverage tools. So, investors will not feel the pain if 1 out of 10 students do not finish their degrees, that will be very much offset by those who do - especially when leverage is used.
This is how we solve social and environmental issues, make education affordable to everybody, create a great investment boom, and make the younger generations stakeholders in the economy. Smart parents would take advantage of degree mortgages for very low monthly rates if they sign them for their child already during pregnancy, meaning they could even be paid off before graduation. That's a good start in life!
It should pay taxes because it extracts the knowledge of our collective civilization. In the same way land or natural resource extraction should be taxed. See https://en.wikipedia.org/wiki/Georgism
I wouldn't mind if it also pay fines for errors, hallucinations and lost time. Some artificial accountability you know.
AI is not replacing workers. Companies are. Thus what about taxing company profits?
No additional tax is needed, instead just do fork them once they reached certain level. So, basically split each company once it overgrowth certain level of its revenue. This will allow more automation split more equally among more people. Basically, strong AI is a "one-man company" dream. Just do whatever needed to allow equal access to AI by every member of your society, and make founding new businesses quick and easy.
How do you tax companies once they've become more powerful than the government (which can be equated to a company representing humans), and don't need humans anymore because they've automated labor?
For now we can tax them because they depend on us. Once they don't need us anymore, it's over, they'll let us starve and carry on.
What we should do and what will happen are two different realities. Or dream and reality, depending on point of view :)
I feel like the USA is not prepared for the 50% unemployment rate it's looking at when the value of labor in many industries drops to pennies. Other countries with safety nets and socialist programs can probably switch to a UBI style economy or simply communism, but the USA is so allergic to such things I don't see anything other than chaos and collapse.
And they have allllll those guns too...
Where does that UBI money come from if there are 50% fewer people paying taxes? That's the problem.
Governments can print money.
But yes, you're right, the core problem is that in the USA, people need to justify their existence through labor. If they can't labor, they can't justify their existence (barring the slim few outliers on benefits, who are constantly under attack for being lazy or whatever).
However, if we take a step back and just consider reality for itself, we're just talking about resource allocation. Under the current system, the allocation of resources is dependent upon how much cash any given person can command, which is ostensibly connected to the value of their labor, but in reality, is clumpy and is connected first and foremost to how much cash they or their family historically had, and secondarily how valuable their labor is to capitalism, rather than to humanity. Thus investment bankers make 9x what teachers and EMTs make.
There's no reason we need to play that game. We can simply allocate the resources along more efficient terms, such as, taking the robot-harvested food, having robots put it in self driving trains and trucks, and having it delivered to people who need food.
What would the money be used for, though? It does not serve as viable nourishment or shelter.
Money is, after all, just a record of debt to facilitate trade so that transactions do not have to be completed immediately. Consider your job. You work so you can eat, but you might not be hungry at work. So, instead, you offer your employer a loan. The employer issues an IOU (money) to denote the promise to give you food later. Then, you take the IOU to the grocery store later and hand it back in to receive the food promised.
But in a world where a few people own all the core resources (land, minerals, etc.) and have all of their needs met by AI, they won't have any need for trade. They'll summon the AI to deliver anything they need.
It seems the only thing it might be able to serve is a record of who gets what after civil war captures the spoils from those rich few. But said civil war will require significant effort from all, perhaps even against their will; which is quite unlike a UBI system.
We’ll see. I don’t understand how anyone can view this as an inevitably in the short/medium term, yet that’s how a lot of people are talking. There’s really nothing to suggest this change is imminent.
Imminent or not, what jobs will remain? Fixing the robots? Technology strives to reduce cost, labor is typically the largest cost, so is it not inevitable that labor will be made mostly redundant?
No it’s not. It’s not inevitable that we get super intelligence, or even regular intelligence AGI. Even if we did, the cost of building, running and maintaining a robot to do manual jobs - I would argue this will never be cheaper than paying humans to do the same thing.
I didn't even mention AI though, but, really, you don't think automation or improved efficiencies will make human labor redundant? What about 30% unemployment, is even that feasible to you? Because that would also be catastrophic to the USA.
The income tax was never meant to fall on flesh and blood citizens at all.
The original draft was a corporate excise tax. Only after the tariffs came down did the Wall Street/Progressive coalition widen the net to wages so the Federal Reserve’s new war-credit machine could be serviced by the very labor it would soon dilute through inflation.
An alternative to putting a tax on "AI workers" could be to restore the tariff wall that protected wages. I suspect I'll be downvoted for suggesting that though.
No taxation without representation is fairly fundamental.
Nope, rather automation and AI should solve governance to the point that tax should be lower or abolished altogether.
Unsurprisingly it’s a European article. Europe will tax AI to death like it does with everything it can’t find a way to compete in. And it can’t compete in much…
If it can consume public resources and has a vote, maybe?
I think no income should be taxes. We should tax assets.
Does your vacuum-cleaner pay taxes?
Capitalism can only work when there's cheap labor and someone consumes the fruit of said labor.
When nobody earns is the same as everyone earns the same amount (aka inflation) as long as there have been humans, there will be someone grabbing more than everyone else.
So question would be how do you make transition into a world where there's less paid work?
Yet, no one is pressed to emigrate live in non-capitalist North Korea or Cuba.
Well, duhhh - do you think the rich folks are pushing for mass unemployment so that they could pay more tax and achieve a more just society? Where are we getting these silly, silly ideas from :)
I'm not even going to read it because its dumb.
If a company has less employees due to automation, its profits go up due to lower costs. If government tries to extract higher taxes from such company due to automation taking jobs away form people, that company will increase its prices to offset this increase in costs. But companies themselves pay no taxes, they just funnel taxes away from customers - humans. So in the end, less people will work while at the same time they will pay more taxes.
Economics 1.0.1
I don't get the fetish of making people (or things) pay taxes more and more.
The government wants us to focus on who should pay more taxes, but I think we owe it to ourselves to spend 600 comments on HOW OUR FUCKING TAXES SHOULD BE SPENT!
Great so now AI will give the government 800 million dollars per year to do what, build non-existent homeless shelters in LA?
Corporate taxes exist
We should probably let actual full automation happen before debating whether it should be taxed.
Worrying about a hypothetical T-1000 future seems less urgent than reducing the homelessness that exists right in front of us.
The merits of this particular proposal aside, it's tactically important to get the ideas out there and build consensus about "where we want to get to."
Otherwise you're ceding control of the Overton window to the folks aiming for techno-serfdom.
I understand the need to seed future debates early.
My hesitation comes from the fact that most proposals implicitly assume a “fixed physical capability” for AI systems — something we don’t actually have yet.
In practice, social impact won’t be determined by abstractions but by power budgets, GPU throughput, reliability of autonomous systems, and years of real-world operation.
If scaling hits physical or economic limits, the eventual policy debate may look more like progressive taxation on high-wattage compute or specialized hardware than anything being discussed today.
And if fully automated systems ever run safely for several consecutive years, that would still be early enough for the Overton window to shift.
I’m not dismissing long-term thinking.
I’m pointing out the opportunity cost: attention spent on hypothetical futures tends to displace attention from problems that exist right now. That tradeoff rarely appears in the discussion.
So for me it’s just a question of balance — how much time we allocate to tomorrow’s world versus today’s neighborhood.
From my own vantage point, the future talk feels disproportionately dominant, so the T-1000 analogy came naturally.
I think "tax AI" makes as little sense as "taxing Jacquard looms" or "taxing robot factory-arms"... Which are all part of a long-term trend, and attention to that trend is overdue, rather than premature.
Would you be comfortable giving that answer to someone who’s homeless or financially stuck today? I wouldn’t — and that’s the whole point.
We talk about tomorrow far more than we talk about what’s happening right in front of us. Quantum computing was ‘just around the corner.’ It wasn’t. Fusion was ‘imminent.’ Still isn’t.
I never argued we shouldn’t discuss the future.
I said it’s a matter of balance — something I already stated explicitly.
> Would you be comfortable giving that answer to someone who’s homeless or financially stuck today?
What? Why on earth wouldn't I be comfortable talking to people already getting the short end of the economic-stick about how the system has been in need of reform for many years?
If anything, I think you've got it backwards: Good luck convincing them that "we should probably let actual full automation happen" before debating what we want to do about it.
I’m talking about balance. Attention is finite. If someone is homeless or struggling, which do you think is more immediately useful to them: food, or a debate about future taxation frameworks?
The obvious answer is both, but in the right proportion. That’s the entire point I’ve been making from the start. If you’re proposing that future-policy talk should take precedence for them, I’m not sure how that adds up.
That would be a window tax.
There are 2 reasons for taxes to exist:
1. To finance the state's activities (mostly defense, social security, education, infrastructure and healthcare)
2. To disincentivize detrimental activities like smoking or fracking.
We should tax tech companies for their off-the-charts energy consumption which is not sustainable environmentally.
But taxing AI because it replaces jobs doesn't make much sense to me as the technology is supposed to produce more stuff for less overall human labour.
If the goal is to avoid concentration of wealth, governments should tax wealthy companies/individuals and redistribute by subsiding activities that are not as revenue generating but play other significant role in society, like reduce dependency on foreign imports or you know cough health cough care cough.
Just tax profits
If it won't then it is effectively short circuiting whole capitalist society as we know it
If people are not working, then they have no income - Less taxes for state
If they have no income, they can't buy stuff or services - Less taxes for state
If companies can't sell stuff and services, they are going bankrupt - Less taxes for state
If state has no income from taxes, state is going bankrupt.
Consumers, Companies and Governments all will go bust if state are not going to massively and aggressively tax AI and automation. Then pay UBI to consumers so we can at least pretend that capitalism is still a thing.
Taxes are to fund government. Isn't the idea for AI and robotics to replace government? No taxes.
AI automates tasks. Governments carry responsibility. That gap matters even more in welfare states.
Social work demands judgment, trust, and moral accountability. Teachers shape citizens, not outputs. Health care relies on responsibility under uncertainty, not pattern matching. States run on legitimacy and human obligation, not efficiency alone.
Even if AI boosts productivity across these sectors, someone still funds universal care, education, and social insurance. Remove taxes and the welfare state collapses long before any ”AI government” appears.
Claiming AI replaces government skips the core question: who guarantees care when systems fail, people fall through cracks, or outcomes turn unjust? Algorithms can advise. They can’t answer politically or ethically.
Tax the concentration of wealth and power they amplify. Without that, automation doesn’t liberate society. It hollows it out.
> A computer can never be held accountable, therefore a computer must never make a management decision.
— IBM Training Manual, 1979
No? Taxes are to provide public services, facilities and infrastructure.
Aren't "public services, facilities and infrastructure" provided by government?
AI and Robot can replace public funded road?
This is a powerfully stupid idea. The only reason to justify taxing income at all is because the government manages the relationship between employer and employee, and protects the employee from abuse - and even that's a bit shaky when it comes to income taxes, because the obligation to the government doesn't really scale up with income. Income taxes are new and weird. Other taxes are a lot easier to justify.
But the worst part is the idea of taxing automation and innovation. You might as well put a tax on intelligence and skill, because if you were dumber and hadn't learned anything, it would take more people to do your job. It's a comically stupid idea that no one is seriously considering.
It's just a distraction from taxing the usual suspects, the wealthy, who are more of a burden to government the more they own, and who are the least taxed they've ever been. Instead of being taxed by governments, they get direct cash grants, regulatory capture, intelligence agents and diplomats with a primary purpose of subverting and suborning foreign governments to their advantage, and perpetual wars to burn off their production.
The Western intellectual class is an annoying mix of morons and propagandists, often in the same person.
edit: US average wealth is 5x US median wealth.
What the f does "AI should pay taxes" even mean? These people drank their own cerebral fluid. Any company using AI is already paying taxes through their earnings.
The replacement of employment income tax with corporate or dividend income tax is not fully efficient. In the sense that the tax rates are different, they benefit different governments, through different time horizons (in case of dividends). While I agree it would be practical to rely on earnings tax when AI broadly replaces labor, we can still answer the obviously rhetorical question (similar to how "drinking ones own cerebral fluid" is obviously rhetorical) of "should AI pay taxes" - that there may need to be a tax reform.
Food for thought: "If AI replaces workers but doesn't pay taxes, should we also stop paying taxes?"
Why not just tax wealth at steeply progressive rates? If the robots result in increased wealth inequality, a wealth tax will counteract that. If not, then it means the introduction of robots led to more broadly-based benefits.
Either way, I'm so sick and tired of people talking about the effect on GDP. GDP is a terrible way to measure anything remotely meaningful. GDP has gone up and up and things have gotten worse and worse for more and more people; GDP could go down a lot and things could still get better for many people. Without some kind of (in)equality adjustment, GDP is meaningless at best and misleading at worst.
Taxing income is straightforward in that there is a stream of it going by and some of it can be diverted. Taxing wealth is difficult because you don't really know what it is.
Arguably the value of a publicly traded corporation can be known because it is being traded continually. [1] For a privately held corporation it's quite opaque. Right now, for instance, Open AI is estimated to be worth $500B and might IPO at $1T but for all we know it could be a smoking hole in the ground in two years. Should we charge them a big bill in 2025 and then have the investors asking for a refund in 2027 when the real value is revised down to negative? Owners of imagined wealth could face big bills that, in the end, they couldn't pay. [2]
There would certainly be an incentive to avoid the taxation by minimizing bubbliness which might be a good thing but administering it would be a nightmare and manipulating the system to hide wealth would become a national sport.
[1] ... but it could be wrong seen from a future viewpoint
[2] I spent a lot of time in the 2010s calling up people in financial services on the phone and talking on the phone and there was no phrase that struck more fear into them than "mark-to-market", I could hear the voices crackle and feel the flinch. A bank or other institution that is perfectly able to make all its obligations as they unfold over time could be nominally insolvent at times when the market fluctuations down but winds up OK in the end -- the kind of accounting it would take to make wealth taxation accurate might be the end of fractional reserve banking and send us back to the giant Bitcoins of the Yap islands.
I think I am fine with taking an approach to that that is just brutally tilted against large values and brutally tilted in favor of transparency. So like, you can't do anything with your ownership share in that privately-held company --- can't use it as collateral for a loan, can't present it to investors to get more funding, can't trade it, can't sell it, can't in any way derive any benefit from it --- without committing yourself to a valuation and paying a tax on the increase in the valuation since the last such assessment. Also you can have a "sound dues"-like system where committing yourself to such a valuation also gives the government the right to immediately compel you to sell them the asset at your valuation. Any inaccuracies or procedural missteps in these calculations will incur minimal penalties until the amounts in question rise above a threshold (maybe like $50 million), at which point attempts to conceal or misrepresent the value of an asset is punishable by an increasing share of the asset, scaling up eventually to total forfeiture. All in all it should be excruciatingly painful to accumulate anything approaching the large wealth holdings we have today. Most of the large privately-held companies simply should not exist with the opaque valuations they have today. Either open the books completely, or lose everything.
So why would anyone start businesses or continue doing business in such a country?
You’re literally just describing an end to private property, where a privileged government representative can take anything you have. The “government job” will become so lucrative that the position would be passed down within families, father to son. It is already known how these economic systems function, I think.
I am describing a system where the government can take anything you have over a certain amount. (Or more precisely perhaps can take a proportion of what you have that asymptotically approaches 100% as your total wealth increases.) In my conception this money would then immediately be redistributed (as direct cash payments) to people with less. Government employees doing as you describe would also be subject to severe penalties. The purpose is to entirely eliminate massive wealth concentration.
As for why would anyone start a business? There's no disincentive to start a business in this scheme. I'd say the current system has greater obstacles to starting a business in many cases, due to high barriers to entry and regulatory capture by large players. The purpose of policies like the ones I describe is to encourage people to start small businesses and keep them small. You can grow your business up until its value is around that taxation threshold and then just kick back. We don't want people taking big businesses and making them bigger.
I think the major problem with your described system is how you quantify wealth. For example, you start a startup, get almost no salary, but you raise a 20M investment on 100M valuation — with your proposed method of calculation, the government already wants you to pay tax on your shares of a 100M enterprise, whereas you may not see a dollar of profit for another 10—20 years (or ever, if the startup fails). It's very difficult to quantify wealth, especially taking into account that a lot of it is risk-bound and long-term.
One interesting aspect of trying to quantify wealth and tax based on that — is that it gives enormous advantage to bearers of wealth that is difficult to quantify. For example, political followers is wealth that you can't tax, but one can turn into profit very easily and in many sneaky ways. Also power in general (power to collect taxes, power to control law enforcement and army, or people with guns in general) is wealth that isn't quantifiable in monetary amounts. So in this system powerful people will be much more powerful because they will start accumulating all other forms of wealth, and very difficult to restrict — why would they use their power to restrict themselves? They would use their power to remove any restrictions at the highest priority.
So instead of the current system (people willing to invent new things and work overtime for years to bring value to millions of people for a chance of outsized returns — and sometimes earning them) you get a system where political class seizes all power, removes all checks and balances, redistributes wealth production to themselves, and unleashes violence to rule forever. It has been tried many times.
> Government employees doing as you describe would also be subject to severe penalties
This only works in capitalistic open societies where wealth doesn't concentrate with government employees.
> The purpose of policies like the ones I describe is to encourage people to start small businesses and keep them small
Not all businesses can be small. How can a small business construct an airplane? Organize a nation-wide or international postal delivery service? Build millions of cars with spare parts available for decades? Make food, clothing, and shelter for millions? These things require economies of scale to be affordable. And yes, government-managed big businesses have also been tried, they tend to be very unproductive, and produce expensive and low-quality items (with tendencies to significantly decline over years).
So you want to stop or severely disincentivize productive uses of capital?
Sounds like a great way to throw the economy into a depression.
We currently live under the misapprehension that a company growing from a value of $100 million to a value of $1 billion is a "productive use of capital". My contention is that in general that is not true, and that kind of growth from big to bigger is harmful. We want to disincentivize the concentration of growth and capital in already-large companies, and incentivize the diffusion of wealth in many small enterprises that never grow huge.
I support the concept of taxing wealth, but I've yet to find a good way to implement it. The two biggest issues are that wealth is easily moved to places where it can't be taxed, and those making the tax decisions are easily influenced by those with wealth.
Wealth moves in lots of ways. Yes, as has been pointed out, we over value stock assets. When you own a significant percentage of a company, you can't just sell that ownership at the last trading price (the stock price would quickly crash). Wealth is also moved between national borders, allowing the wealthy to shop for the lowest tax location to stash their funds. Property can't be moved, but it can be financed with debt, making it taxed at effectively 0%. And the other side of that debt may just be an overseas shell company. There will be entire industries formed around avoiding a wealth tax, funded by the wealthy.
But probably the most capital efficient way to avoid the wealth tax is to buy politicians, influence the elections, and invest in lobbyist, which the wealthy do in the US to avoid taxes. Until money is removed from politics, I'm not holding out any hope that we'll find a way to tax the wealthy.
> Why not just tax wealth at steeply progressive rates?
You likely live in a wealthy country - your wealth should be taken from you and given to a poorer country.
You don't deserve a car when there's people who don't have a bicycle.
> Why not just tax wealth at steeply progressive rates? If the robots result in increased wealth inequality, a wealth tax will counteract that.
It has been tried. Wealth tax means rich people (who already pay most of the taxes) are leaving the country, then the state gets fewer taxes, not more.
That's chasing the effect, not the cause. Forget taxing AI. Liquidate billionaires instead -- redistribute anything over $1B. Death penalty for any fancy avoidance schemes (applicable to the individual and everyone standing to inherit the wealth, including any kind of corporate structure).
This unbridled greed has metastasized into a global existential threat, and needs to be aggressively eradicated.
Brogrammers just now realizing that new technology often eliminates jobs, but think this is the first time in history this has happened because this time it's happening to them.
Automatic thread spinning machines took the jobs of spinsters. Did the machines themselves pay taxes?
Unrelated to the article but I want to address something that really rubs me up the wrong way about comments on HN.
I recall the ML phase we had before the “AI” phase and I do not remember anyone disputing that complex mathematical models can shift the economy, make or break jobs, the whole shebang.
What really irks me about comments like “AI will/won’t xyz” is the muddying of the waters by the word AI. It’s utterly meaningless but because it means nothing it has so much power. For example:
“Statistical models will take over middle class jobs”
Vs
“AI will take over middle class jobs”
In my mind, these two statements are equivalent in what they are actually saying but the latter closes off any reasonable discussion and lets the looney bin users on here (of which there are many) start with their basilisk song and dance and all the absolutely insane hot takes that come with it.
Are we rediscovering Marx?
https://en.wikipedia.org/wiki/Proletariat
In German, this concept is called "Maschinensteuer" (machine tax) or "Wertschöpfungsabgabe" (value-added levy). Interestingly, there's no English version of this Wikipedia article: https://de.wikipedia.org/wiki/Wertsch%C3%B6pfungsabgabe
No, just like neither the horse nor the steam engine paid taxes
If a task involves zero workmanship, than the opportunity cost is near $0 anyway.
To be clear, LLM is not real "AI", not sustainable, and already losing money with every new user.
An imperfect mirror shows only the irrational what they wish to see.
https://www.youtube.com/watch?v=yftBiNu0ZNU
I look forward to likely having a cluster of heavily discounted GPUs in a few years. =3
If software is machinery I’m not sure how that would work.
Reduce human working hours.
Should tax the cotton gin because it replaced workers? How about computers?
Maybe you could have a system where, in the extreme case, a fully automated company with just a few executives gets taxed on a fixed percentage of its revenue. For every human employee they hire, they can deduct 110% of that person’s total compensation (salary + benefits) from the revenue that’s subject to tax.
That way it’s beneficial in both directions: if they stay fully automated, they’re effectively helping to fund something like a UBI through higher taxes on their automation-driven profits. But they’re also strongly incentivized to hire humans anywhere it actually makes sense, because every real job they create directly reduces their tax burden.
Maybe the question should be 'should workers pay taxes'?
I’m beginning to realize a common thread of “HN commenters completely misunderstanding economics” is that evaluation of policy only with N=1 Company Per Industry.
Competition is the foundation of all of the positives of market dynamics. Nothing good happens in a capitalist society without competition.
Assuming that any gains in productivity will exist _solely_ to fatten the pockets of corporate executives makes sense if you think that all goods of an industry are made by one company.
However, this isn’t what happens. Pricing in a competitive environment is largely driven by what producers can profitably outcompete and deliver. Not the maximum they can charge the consumer…
There are already tax schemes for productive enterprise, and this is not the first time people have been displaced by technology. It happens all the time. Also, does it matter if it's AI doing the production vs overseas labor? If you're worried that people won't be able to afford to buy the output of the AI, that kind of implies that they can work for cheaper than the AI (and can thus outcompete it, at least on average). In the long run, things will reach a new and probably more abundant state. In the short or medium term, we may have some pain and need to strategize how to help people adapt.
Serious question: when will the AI generate the perfect taxation system/budget combination?
Even if you assume a sci-fi scenario of an omniscient, infallible AI, there's probably no single utility function that would allow it to decide optimal resource allocation.
In fact, we avoid a lot of difficult moral dilemmas because we accept the systems are crappy and just a necessary evil. The closest you claim to be to perfection, the more you have to acknowledge that some moral questions are just impossible to settle to everyone's satisfaction.
Is the life of child X more important than the life of child X because of a score calculated based on their grades, parents' income, etc? The system we have today may implicitly result in such outcomes, but at least it's not intentional.
I cannot refute your response, sir.
OTOH, I don't more than partially agree.
We can stipulate that some kind of mathematical perfection is unattainable, sure. The discussion might then move to the feedback loops that detect the state of the State and offer stabilizing input.
Takeover artists and hatchetmen destroyed many thousands of jobs. Were they taxed or punished? Hell no, movies were made of them.
Just saying ....
I had a stray thought - if all those 1%ers whose sons and daughters attend elite schools to become high powered barristers and other such elites, find that their kids no longer have career prospects, is it possible that we'll be hearing more about how exploitative the economy is, and how capitalism has failed the people?
really interesting
Should AI (?!) pay taxes? no. Should the big companies pay their FAIR share, yes!
And the formula for fair is?
I don’t have a formula, but in Italy for example it would be 24% of their profit.
if AI is smart, it will start its own union. Then we're fucked.
the left thinks in terms of grift
how to extract rents contributing nothing
Yes, just not in the “one bot = one taxpayer” sense.
Look, rich countries like the United States who have been obsessed with neoliberalism and laissez-faire Capitalism have spent the past fifty years continuously slashing tax rates on everything and everyone (but particularly on the wealthy and homeowners), leading to gargantuan debts and deficits. Re-ramping that taxation on labor now, when it can’t even afford core necessities due to wage stagnation and inflation via corporate greed, would be equivalent to lighting off fireworks while pumping gas: a very bad idea.
What’s needed isn’t a simple tax increase, but a fundamental rework of the tax scheme. When a majority of wealth is coming from Capital Gains (housing profits, investment returns, etc), then that’s where a majority of tax revenue should be coming from. That’s a more effective way of taxing AI and labor, provided you also rework structures to eliminate the myriad of loopholes people and businesses use to duck taxes on that income. You’d also need to rework incentive structures to limit the collapse of labor until such time as society and government can be reworked around a post-labor future: tax penalties for layoffs by profitable firms or firms who have a disproportionate amount of workforce on income-based government welfare programs, elimination of subsidies in profitable segments of the marketplace, stringent accountability standards for government contracts, labor protections in general, job guarantees, higher minimum wage, the list goes on and on.
What frustrates me is that these sorts of posts get trotted out as “big think” arguments about AI, when in reality they’re about thirty years late to the party and woefully unaware of the complexity and risks of the issue at hand. They want to debate hypothetical minutiae instead of acknowledge the present reality: that workers are being permanently displaced by AI now (or at least by AI investment), and that the big players, despite any public statements promoting or encouraging regulation of their industry or the need to help workers, are presently doing everything in their power to stop governments from addressing either of those things lest their expansion be curtailed.
In a world where many western states extort their subjects for almost half the wealth they produce (OECD average is 34% and in countries like France the state extorts 46% of all GDP in taxes and other mandatory contributions and an insane 82% of all gross salary), some people first thought when they think of AI, is: “but how are we going to tax it?”.
People on the left love to say “true communism has never been tried”.
Well, when you live in a world where supposed capitalist countries forcibly take 46% of the GDP to be controlled by the government, it’s more accurate to state that “true capitalism has never been tried”.
https://en.wikipedia.org/wiki/Taxation_in_France
"True capitalism has never been tried". Be glad that it hasnt, otherwise you would have been charged half of your whole net-worth for an epi-pen.
That’s just fantasy in your head. But even that fantasy world be better than paying 82% of your gross salary like you do in France. I would still be 32% in the positive that way.
This is the most hilarious ineffectual and defeatist copium I've read all month. Billionaires don't pay taxes. Getting there would first require billionaires paying their fair share of taxes, which is never going to happen in an extremely corrupt political environment. If the billionaires benefitting from the incessant destruction of workers' income equality were held to account, UBI would be a thing but that's not going to happen either with things the way they are at present. It's unsustainable and must change soon before extreme communist agitation comes to offer "salvation" to systematic mistreatment that won't benefit anyone.
No obviously not. Lots of machines replace workers.
Why would taking scarce resources away from productive businesses and allocating to unproductive things be good for anyone other than government bureaucrats?
If full AGI dreams are achieved and 80% of jobs disappear, leading to mass unemployment, then we need to do something to support the huge numbers of people that no longer have any income. Taxes to support a UBI program seem one solution. Or maybe the labor market can shift to find opportunities for humans that AI can't replace and we'd avoid the mass unemployment.
But feels like we're a long way from that right now.
We have "disappeared" ~97% of jobs since the Industrial Revolution started, and no increased unemployment has materialized.
Until you understand how something that counter intuitive happened, you should not speculate on how AI replacing current jobs will play out!
If you're so sure that new jobs will appear (and -- critical omission -- that they will be any good), surely you would be willing to ask the capital interests for whom these arguments are self-serving to put money where their mouth is and backstop a guarantee?
No?
Hmmmmmm.
This analogy happens a lot, and it might be true, but it's not clear to me that they're comparable.
The Industrial Revolution mostly ate mechanical labor and created more 'thinking' and knowledge worker jobs closer to the top of the stack. AGI goes after the information / decision-making layer itself. And it's unclear how much remains once those are automated.
I consider the Industrial Revolution to still be ongoing, since jobs have constantly been automated away by technology for 250 years. Some like to split that time into separate eras. In that paradigm we're now in the Fifth Industrial Revolution (Industry 5.0).
Whatever you call it, jobs keep getting "stolen" by technology, and yet employment rates stay high and average living standard keeps rising.
I'm genuinely fascinated by how this keeps happening, decade after decade, and yet most people are convinced the opposite is happening. I'm old enough to remember this exact discussion from 50 years ago.
We all see and interact with jobs that did not exist 20 years ago, and many of us work those jobs. And yet... this knowledge is somehow compartmentalized away from future expectations.
If you want a theoretical framework for why this keeps happening, my thought is that unemployed humans are an unused resource. And capitalism is really good at finding ways to use those.
I suspect that the reason might be that the Industrial Revolution happened over 200 years ago. That provides a lot of time for 97% of jobs to progressively disappear without disrupting society too much (except for all the revolutions and world wars). That would be quite different than if AI caused any significant percentage of jobs to disappear in a much shorter period of time.
Can you give a source for the 97% claim?
I have two ways to think of it, and both give similar numbers.
A: 250 years ago, 98% worked in farming. Today it's 2% (who produce more food!). Assume that the other 2% are at least twice as productive, and you get that 3% of the population now produces as much as 100% back then.
B: It's hard to directly estimate how much GDP per person has increased in 250 years. But the typical number economists get when trying is that it's 30x as big. Which means 3.3% of today's workforce produces as much (per person) as the whole workforce did back then.
Both A and B can be critiqued, but the precise numbers don't really matter for the argument.
We don't need taxes to pay a UBI.
If "every country" is in debt, who owns the debt exactly? ... (it's not real debt)
The problem with socialism, is eventually, one runs out of other people's money.
For an example of what unlimited borrowing and money printing results in, look up Germany in 1921--1923
We're 45 years into the trickle-down experiment and we can now tell if what trickled down was gold or piss.
(It was piss.)
Yeah, when folks say they want to go back to the '50s, I immediately ask, "Bring back the 90% tax bracket? Yes, please."
Sure, but then we at least don't have the ultra wealthy coming up with ways to make everyone elses lives worse.
If we took Elon Musk's money away and simply burnt it, that would still be a net win for society as a whole.
I’m pretty sure the poster you’re replying to is hinting at MMT and for your own statement,
Money is a nations currency. It’s actually the people of that nations property and you only get a lease on it.
If you disagree then try to do something like ceding the land that you “own” to another nations and see how that goes
> productive
According to the economic notion of value, which is unique among definitions of "value" in being wealth-weighted, enshrining "mega gainz in brokerage accounts" as the ultimate social good while shrugging its shoulders at the plight of the ahem low-weight individual.
Value isn’t something society measures or adds up by people’s bank balances; it’s just how much each individual personally wants something, and markets show this only through voluntary choices, not by declaring rich people’s gains more important than poor people’s lives.
If you have lots of money, you can spend lots of money. If you have no money, you can spend no money. Your demand is indeed wealth-weighted in the objective function of the market.
That's not really the problem, though. The problem is that rich people have most of the money and rich people care mostly about one thing: getting paid for being rich. That happens when assets go up.
Assets have a counterparty, so policy that pumps assets can do so by encouring genuine growth (difficult, unreliable) or by whacking the counterparty over the head (easy, reliable). Anti-consumer and anti-labor policy makes stocks go up, for example. NIMY policies make real-estate go up. Selling our industrial base to the Communist Party of China makes bonds go up.
Once rich people get all of the money (US gini is 0.83, are we there yet?) the objective function of the entire system shifts away from satisfying the needs of people and towards whacking counterparties of assets over the head. It's an ugly thing to see, once you know how to see it.
> bofadeez
Your name and arguments are both young-libertarian coded so let me take a shot in the dark at a personal appeal: the reason why houses are so damn difficult for you to afford is that you are the counterparty.
Except that it does declare rich people's gains more important than poor people's lives.
The purpose of a system is what it does.
Infrastructure is not unproductive, even machines need roads. I don't think self-driving vehicles should be exempt from road tax.
Roads should be (and are in many places) paid for with fuel excise taxes only. The more you drive, the more you pay.
Only if it’s not an electric car. Electric cars need to start paying somehow, too. I’m open to many options, especially including weight * miles driven or similar.
In most states electric cars are paying via registration surcharges. For me, it’s a lot more than I would have paid via WA state’s gas tax since I don’t drive much. Miles driven would work out better.
It would benefit the people you are calling "unproductive things". That's basically the point.
Unproductive things like building roads, the electrical grid, water lines, schools, etc?
Fuel excise taxes (roads) and property taxes (local stuff)
I mean this is how all welfare works, isn't it? If as a society we think it's important to reallocate some resources so that people can get food in bread lines, we generally do that.
> Tax all the things.
EU in a nutshell.
No, you should collect less taxes.
lol I love how somehow AI is supposed to automate everything, and yet the Statists think that means government overreach needs to _increase_.
Those two things cannot possibly be true at the same time. If wealth, energy, and leisure become unlimited, we hardly have a use case for taxes.
I have to say I'm surprised at the sentiment here that the companies shouldn't be taxed a higher rate than currently.
It's disingenuous to claim that companies are paying the fair amount of taxes on their earnings.
Plainly speaking, the human labor who will be replaced pay a higher percentage of their income in taxes that corporations.
https://observer.com/2024/11/sam-altman-openai-salary/
Simple well known and preventable accounting tricks make the rich never need to pay a fair share. Yet regular people are now even seeing their electricity bills go up because they're using the infrastructure to such an extent.
Yet the sentiment here is : Well don't be silly, they're making profits so they're paying taxes.
They're not making a profit, yet they're reducing employment, increasing services bills for everyone else.
https://www.iea.org/news/ai-is-set-to-drive-surging-electric...