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.
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.
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's a simple way out of it if you just want to get rid of double taxation though: Make dividends a tax deduction to the corporation. Then if the corporation makes money and doesn't issue it as dividends, they pay tax on it. If they do, the corporation doesn't, but the investor does. And then it gets taxed once one way or another but not twice.
I think each company should pay a low rate on all money passing through. Let’s say 0.1 to 1%.
Building huge pyramids of shell companies has probably no economic benefit and is mostly done to evade some regulation or taxes or liability. The ideas how to abuse this are too numerous to count so the government should not try to but simply disincentivize the use of corporations just a little bit. The cost would be borne by the individuals who have the most elaborate company architectures which is probably synonymous with the biggest tax evaders.
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.
> 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.
Maybe people would view it more like that if they actually had the option to get paid cash instead of an insurance plan of the same supposed value. With some employees that is possible to negotiate, but for the vast majority of employees with a healthcare plan that is a big no unless they are willing to accept a tiny fraction of the insurance value.
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.
> 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.
Well, you still have to pay for the energy (to extract raw material and transform it into final product, and move final product into your hands). So unless we assume energy cost is 0 and raw materials are not scarce, the final product has a cost, and a price, now my understanding is that if everyone uses dark factories, the margin would go down, and so the gain per "company" would drop too, hence the limited tax base.
My guess is from the 2 ends of the spectrum that you listed, we are moving from "there is still work you need people to do, and then they do that, and still have jobs." to "we automate everything". And as we move to the "we automate everything" end of the spectrum, the number of jobs lost would increase, the taxes collected (VAT, income, capital gain, etc.) would decrease (assuming the current tax system) and yet people (employed or not) would still education, health care, social security (retirement).
If we do not change how we tax things, I do not see how we would sustain a society where the majority is materially (gizmos) rich, but financially poor (no job, no retirement, no social security, no education).
While dark factories keep producing high volume of gizmos for next to nothing...
I am curious how we can manage that transition, which I believe could happen way faster than politicians can move.
> Well, you still have to pay for the energy (to extract raw material and transform it into final product, and move final product into your hands).
But then you're back to having something that isn't automated. If machines do this then it's free. If you need people to do it then people have jobs.
> And as we move to the "we automate everything" end of the spectrum, the number of jobs lost would increase, the taxes collected (VAT, income, capital gain, etc.) would decrease (assuming the current tax system) and yet people (employed or not) would still education, health care, social security (retirement).
But things would also cost less, in the same proportion.
Suppose healthcare is 20% of the economy, can't be automated, and we automate everything else. Then tax revenue goes down by 80%, but so do costs, so people only need 20% as much in government services or those services only cost 20% as much to provide.
Meanwhile you still need people to be doctors and nurses but not other things, so more people become doctors and nurses. This drives down wages there, but that's fine when the doctors and nurses are also paying 80% less for everything. And at the lower wages you can justify more work to be done. More people do medical research, doctors get to spend more time with each patient, etc. Soon everyone has a job again.
Let's even consider the hypothetical where that can't happen. There are 8 billion people and only a million jobs. No other jobs are possible, somehow. How much are those million people going to get paid? Peanuts, because like everyone else they'd have negligible living expenses and they'd be in competition with 8 billion people for who would be willing to do it for the least amount of compensation. Their payment would be something like bragging rights, or all the slots would be filled by volunteers.
But in practice we would never "run out" of jobs because the supply curve always intersects with the demand curve somewhere. If demand goes down then price goes down because there is higher demand at the lower price.
> > Well, you still have to pay for the energy (to extract raw material and transform it into final product, and move final product into your hands).
> But then you're back to having something that isn't automated. If machines do this then it's free. If you need people to do it then people have jobs.
Not sure to follow, machines need energy as input. So unless energy is free and unlimited, even if the machines run without people, there is a cost for the products. It is not free, even if that is 100% automated. At the very least you have to pay for the energy, if not for the raw materials.
> > And as we move to the "we automate everything" end of the spectrum, the number of jobs lost would increase, the taxes collected (VAT, income, capital gain, etc.) would decrease (assuming the current tax system) and yet people (employed or not) would still education, health care, social security (retirement).
> But things would also cost less, in the same proportion.
Yes, things (material) and services would cost less. But still cost the energy to produce those things and services.
> Suppose healthcare is 20% of the economy, can't be automated, and we automate everything else. Then tax revenue goes down by 80%, but so do costs, so people only need 20% as much in government services or those services only cost 20% as much to provide.
Not sure why healthcare would not be 100% automated, but for the exercise, let's assume it still needs some people. Unless you also assume that unemployed people could get some ABI or SNAP from government (in US already 1 out 8 adult receives SNAP) to pay for food (cost less with 100% automation, but still cost the energy for fertilizer, tractors, transport, transformation), for shelter, etc. and pay for healthcare.
I am not sure if the gov lose 80% of its tax collection, it could sustain the population basic needs.
> Meanwhile you still need people to be doctors and nurses but not other things, so more people become doctors and nurses.
Not sure why we need doctors or nurses ? Doctors are mostly a sensor + decision tree... that speaks to the patient. I could see doctors and nurses to disappear eventually. It might take longer for robots to do surgery, but it should eventually come. So the cost should drop.
Drugs manufacturing should be 100% automated too. Lab work automated.
> This drives down wages there, but that's fine when the doctors and nurses are also paying 80% less for everything. And at the lower wages you can justify more work to be done. More people do medical research, doctors get to spend more time with each patient, etc. Soon everyone has a job again.
Let's even consider the hypothetical where that can't happen. There are 8 billion people and only a million jobs. No other jobs are possible, somehow. How much are those million people going to get paid? Peanuts, because like everyone else they'd have negligible living expenses and they'd be in competition with 8 billion people for who would be willing to do it for the least amount of compensation. Their payment would be something like bragging rights, or all the slots would be filled by volunteers.
But in practice we would never "run out" of jobs because the supply curve always intersects with the demand curve somewhere. If demand goes down then price goes down because there is higher demand at the lower price.
I guess the disconnect, for me the end of spectrum, is that all the products and services could eventually be 100% automated without human in the loop, expect for consuming the products/services. Those 100% automated product manufacturing or services, would cost energy (electricity basically) and raw material (arguably free, just need to pick it up on the ground using some energy). So, one machine would build everything and all services, with just energy as input. If energy is not free, then products and services would cost something. How people pay for product and services ?
> Not sure to follow, machines need energy as input. So unless energy is free and unlimited, even if the machines run without people, there is a cost for the products.
But where does energy come from? You would have machines that can make solar panels and install them and operate a power grid, or people would still have jobs doing those things.
> Unless you also assume that unemployed people could get some ABI or SNAP from government (in US already 1 out 8 adult receives SNAP) to pay for food (cost less with 100% automation, but still cost the energy for fertilizer, tractors, transport, transformation), for shelter, etc. and pay for healthcare.
If everything other than healthcare was automated then energy production, fertilizer production, tractor production, transportation, etc. would all be automated.
If everything is automated then everything is free. If there is still anything that can't be automated then people still have jobs doing that.
My problem is when you automate, the benefits are not passed on to the entire chain of people involved even though we start the discussion with that. So what do we do?
In a competitive market, efficiency gains are generally going to end up as lower prices to the customer, which is the main way that ordinary people benefit from them. That doesn't happen when the market is consolidated and the oligopoly keeps the gains themselves.
So, ensure competitive markets by thwarting regulatory capture and enforcing antitrust laws.
Yes, that has been the rule for now. But I am wondering that if the prices drop so much, but the price to pay for that abundance would be the loss of significant part of job market, then how can we keep the economy humming ?
We would need to find a way to give money to people so they can keep participating in the economy even though everything is cheap. If not UBI, we would need to find ways for the majority to do something that is not automated, and give them some coins in exchange.
For millennia the currency has been energy (human labor, then machines) and intelligence (human intelligence, then artificial intelligence). If energy and intelligence price goes down, and the amount of energy and intelligence increases, then what is left for humans to claim some reward/coins ?
> But I am wondering that if the prices drop so much, but the price to pay for that abundance would be the loss of significant part of job market, then how can we keep the economy humming ?
Money is an abstraction, so prices are always relative to wages. If prices go down, that's equivalent to wages going up. If your costs are $1000 and your wages are $1000, that's the same to you as if your costs are $100 and your wages are $100.
So the problem solves itself. You previously needed a job that would pay you $1000 to cover your costs, now you only need one that pays $100. And there is still $100 of work that needs to be done, because that's why things cost $100 instead of $0.
I agree, so the prices of everything would go down. People would be unemployed. Do we plan to give some money to pay for basic stuff (food, shelter) ?
Even if the cost for food and shelter is $1 per month, if there is no revenue, it is still too expensive, right ?
I am trying to understand the speed comparison between how fast the prices will go down, vs. how fast people will lose their jobs. If job loss goes faster than the price decrease, we might have a problem to solve.
> Even if the cost for food and shelter is $1 per month, if there is no revenue, it is still too expensive, right ?
Why would there be no revenue? Right now you need a job that pays at least e.g. $2500/month to afford basic necessities. If those jobs disappear but the cost falls to $1/month, you don't need those jobs, because a job that pays $3/month leaves you in fat city, much less one that pays $50/month.
> If job loss goes faster than the price decrease, we might have a problem to solve.
That would be a transient problem while the prices catch up, not a long-term problem. You could solve that by e.g. printing some money in the short term.
But if we fully automate how to make and sell and deliver TVs and blenders and now I can get a 200" TV for $2 and a blender for $0.05 but now I don't have a job so I can't afford even a basic apartment what do we do with our society?
Like sure all the goods are stupid cheap but things that are actually naturally rivalrous and exclusive like real estate continue to hold value most random people are pretty fucked it seems.
> But if we fully automate how to make and sell and deliver TVs and blenders and now I can get a 200" TV for $2 and a blender for $0.05 but now I don't have a job so I can't afford even a basic apartment what do we do with our society?
Delivery should be automated.
Rent would obviously crater as building housing craters too (robots making it, materials being extracted and manufactured by robots too). But again, it would still cost something (energy at very least and assuming energy is not free).
So I suspect that even if 100% is automated, we would still need little money to pay for the basics (food, shelter).
There is only so much land where people actually want to live. Governments put restrictions on what can be built. It might end up costing $20 to build a 100-story apartment complex, but if the government says buildings can only be five stories high or you have to only build single family homes it doesn't matter.
> It might end up costing $20 to build a 100-story apartment complex, but if the government says buildings can only be five stories high or you have to only build single family homes it doesn't matter.
And that's the point. The problem isn't caused by automation, it's caused by zoning restrictions.
> but now I don't have a job so I can't afford even a basic apartment what do we do with our society?
Apartments aren't land, they're buildings. Buildings can be made arbitrarily tall; if we built tall buildings we'd have more housing units than people long before we ran out of land.
So if there is a machine that can build buildings for free, apartments should be cheap. If there isn't a machine that can build buildings for free, get a job building buildings for money.
Even if 100% automated, there might still be a residual cost to building as it needs energy (assuming than raw material is free). I do not think that because the building would be not free, it would allow human to compete (too slow, inaccurate, etc.)
The problem with that is that it operates from a wrong idea of how to set prices for a product. From first principles, you make a widget, figure out how much it costs to make it, including your time, then add some amount of margin on top, and you have a business. That is incorrect. No, you have product, and then you just make up a number based on circumstances. If you're lucky, the price you manage to sell your widget for is above what it costs to make it. If you're not lucky, it isn't, and you have a sale, and lose less money than if you didn't sell anything. However, if you're lucky, you sell your widget for way more than it costs to make it, because of branding, aka luxury fashion brands. The numbers though, are just made up. That's the trick of capitalism. You just... make up a number! Once you understand that, the world starts to make even less sense than it did before. If pricing were cost-plus, branding and timing wouldn’t matter, and empirically they matter a lot.
You're describing what happens in uncompetitive markets (or for status goods, which have inherently weird behavior because they're a signaling mechanism that relies on waste and artificial scarcity as a mechanism of operation, but also inherently nobody actually needs them).
In an ordinary competitive market, margins are thin because sellers are fungible, so charging slightly less than the competition results in a disproportionate increase in sales because customers are just choosing the lowest price, and then sellers keep lowering prices until margins are thin because it's more profitable to get a $0.05 margin on a thousand units than a $0.10 margin on a dozen units.
Automation drives goods toward zero while destroying the wage base, as Ricardo warned: gains flow to owners (das capital) of scarce resources. Today that’s Ricardian rents on land, housing, zoning, healthcare, education. $2 TVs ain't gonna pay rent.
Antitrust decides who captures surplus, not how people access it once wages stop working. And UBI would just be stapling cash onto a broken distribution system. So what actually replaces labor as the primary claim on surplus?
The only truly scarce things are time and energy/matter. Everything else can be made from those.
Labor is essentially the sale of time. If labor becomes cheaper then energy/matter becomes the bottleneck. Except that there is actually quite a bit of energy and matter in the universe and the main bottleneck on collecting more of it is labor, so if labor gets cheaper then so does energy and matter.
The things you're pointing to are the things that are artificially scarce. How expensive is a housing unit if you can build a 100 story building on any lot and the labor to do that is cheap? Now how expensive is it if building tall buildings is banned and there is an intentional regulatory bottleneck on more people getting trade licenses?
If you still need human labor to build housing then people can get jobs building housing until housing gets cheap. If you don't need human labor to build housing then housing would already be cheap. Unless you have the government artificially constraining the housing supply, in which case you need to fix that. And the same thing for medicine and education.
> Unless you have the government artificially constraining the housing supply, in which case you need to fix that. And the same thing for medicine and education.
That is the meat of it. Zoning laws are why every city doesn't look like Hong Kong, even if it cost $1 to make a sky scraper. There are artificial limits on supply of doctors, and we don't pay teachers enough which is a whole other topic. If that's what we have to fix in order to make progress, I'm suddenly doubtful of how much progress will really be made in the face of the singularity.
> Zoning laws are why every city doesn't look like Hong Kong
The reason every city doesn't look like Hong Kong is that Hong Kong has a population of 7.5 million and a US city is considered "large" if it has 50,000 people.
Zoning laws are why every city doesn't look like Lubbock or Boise, which is hardly a problem.
> If that's what we have to fix in order to make progress
That's what we have to fix in order to make progress. It is what it is.
> 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?
One could argue that AI could replace or add to the health and retirement care work force... I am not saying it should happen, but I am trying to understand where we are going with the AI promises, and their impact on society.
If AI is so good that it can replace health and retirement care, then the price should fall to.
But basically, we would end up with AI and dark factories building gizmos to sustain and entertain humans and fixing them until they die.
I guess taxes at this point are irrelevant, AI could build new factories of factories, money would be useless.
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.
> 200 years ago, 95% of the workers in my country worked in subsistence farming. Today, only 2% are farmers.
Yes, it took some time to go from manual/animal labor (energy used is food) to mechanical labor (mostly oil energy). And oil is more energy dense than food, and tractors are more powerful than horses. And bonus points for the oil, it allowed to build fertilizers to boost productivity per acre. So, yes eventually we just need 2% to do what what 95% used to do in farming.
AI is promising to do the same but in virtually all industries (manufacturing, services, healthcare, etc.) and in a way shorten span.
Work used to be labor (human/animal) fueled by energy (food) + intelligence (human) fueled by energy (food), then labor (machine) fueled by energy (oil/electricity) + intelligence (AI) fueled by energy (electricity).
IF work is mostly done by AI/machines fueled by energy. Then work's price is mostly a function of energy price (assuming materials can be extracted/transported/transformed is also a function of energy).
If energy becomes abundant and cheap, then there is no reasons to not let AI do the work.
But then what happens to the rest of us, how the economy keeps humming ?
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.
> I was talking about the issues with comparing it to singular inventions like the cotton gin or jacquard loom
Ok, appreciate the clarification. But in that time frame there have been a number of really tectonic inventions that changed pretty much everything: steam power, ICE power, electrification, refrigeration, computing and the internet, just to name a few off the top of my head.
> 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)
Same. I am both optimistic about human ability to find new jobs, and skeptical that "AI" is going to make that necessary in the new future.
That amount of change over 200 years is vastly different from the supposed timeline for AI to 'change everything' is the core of the difference. Over that long there's time for people to retrain into other jobs and there's enough people not significantly affected by the change that society as a whole can roll on and support the affected people. Mass disruption and joblessness is extremely destabilizing.
I get what you are saying, and I don't think you are wrong, but it has been like 100 monumental changes in 200 years. The demographic shift of the industrial revolution was particularly painful, to be sure. But we seem to be pretty good at coping with them, overall.
And again, I remain skeptical that general artificial intelligence is actually that close at hand.
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.
Do you think that the velocity of change is different from previously ?
I am wondering if we are touching on a human biological limitation. Human are adaptable and flexible, but there is a limit to that flexibility. Some sort of biological limit on how fast we can turn around.
The technology acceleration is increasing, and I am wondering if there would be a point where the technology would evolve faster than what human biology can comprehend.
1,000 years ago, anyone could pretty much build or fix the current technology (anyone could fix a cart).
50 years ago, a majority of people could build or fix the current technology (e.g. most could fix a car).
this year, a limited number of people can build or fix the current technology (e.g. how many people can fix a self driving car?)
10 years from now, a very limited number of people if any could build or fix the current technology (e.g. explain how is AI doing this thing?)
If AI evolves at the same pace, and replacing labor (robots) and services (AI), I am not sure that human would turn around? How do you think we can turn things around ?
Education ? but we are reaching the limit already of how much technology we can teach in a student lifetime. Now we could argue, that one does not need a PhD in computer science to use AI, but eventually do we even need someone to use AI ? Would AI be cheap and pervasive enough that AI would drive AI would drive AI... why would you add a 20W analog brain in the loop ?
What activity would require human involvement ? Genuinely curious how the technology acceleration in general and AI in particular would affect the economy.
> If AI evolves at the same pace, and replacing labor (robots) and services (AI), I am not sure that human would turn around? How do you think we can turn things around ?
I see no indication that we are close to building a GAI, or that we are close to solving the hallucination problems that severely limit the utility LLMs without human managers. We don't understand how our own intelligence works, or even an ant's. The notion the we are close to replicating or exceeding it seems far fetched to me.
> What activity would require human involvement ?
Nurses, bar tenders, barbers... Hasn't anyone read Player Piano? :)
> How do you think we can turn things around ?
I dunno. Did anyone know how dangerous fire or deadly spear points world work out?
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.
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?
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.
> 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.
> 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.
No, I don't, because I don't spend 100% of my income every year on income-tax applicable goods. A good chunk of my income, even that which is taxed with income tax, goes to other things (like my mortgage, other investments, groceries, savings accounts, charitable donations, etc.) that either defer paying sales taxes or have no sales tax applied.
Meanwhile other purchases have extra sales taxes applied such a liquor or hospitality taxes.
Obviously the hypothetical is assuming a uniform 10% sales tax, but what's your point? If you had a 20% sales tax on accommodations then incorporating a 25% income tax into it would make it a 60% sales tax. If you wanted to continue omitting the existing sales tax contribution to groceries but apply the income tax portion you could use 33% instead of 47% and so on.
My point is some people spend all their money on sales tax applicable things while others don't spend all their income. So those who don't spend all their money get to avoid those taxes on some percentage of their invome, potentially indefinitely.
Think for a second. What kind of household spends every penny they make? Which one maybe manages to toss some money into savings every month? Which one doesn't even come close to spending their income?
Which household here pays the highest effective tax rate?
Which still doesn't have anything to do with whether it's income or sales tax. If someone has some money they're not intending to spend anytime soon then they put it into a 401k to defer the taxes, or any of a dozen other things that have a similar result.
Sure it does. There are caps to those tax advantaged savings accounts. There's no cap on not spending money.
You're still designing a system where the highest effective tax rates are paid by the lowest income people and the lowest effective tax rates are paid by the highest income people. You've pointed to nothing that changes this truth.
> There are caps to those tax advantaged savings accounts.
Caps that are set to the amounts where people start having enough money to hire a tax accountant and thereby use the various other ways of deferring income tax on money you're not immediately spending.
> You're still designing a system where the highest effective tax rates are paid by the lowest income people and the lowest effective tax rates are paid by the highest income people.
The status quo is even worse: They not only defer income tax on the money they're not spending, they defer it on money they are spending, by borrowing against the assets and spending the loan. Which a consumption tax would have them paying.
Meanwhile you can exempt necessities from a consumption tax to various degrees or issue a large fixed tax credit to everyone, which lowers the effective rate on ordinary people by as much as you like.
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.
IIRC one of the Scandinavian nations has solved this with property taxes: you self-declare the value of your property, but the state has the right to buy it at that price.
That only seems like a solution until the loophole-finders get on with their jobs.
Suppose you own a company and you have a trusted friend. The company, not the owner, enters into a contract with the friend that gives them the right to buy all the company's assets for 1% of their value, if the friend can satisfy a condition that they could only satisfy with the cooperation of the existing owner. Then the owner declares that the company is only worth 2% of its ordinary value -- which might even be an overestimate given the risk that the friend could execute the contract. If the government exercises the option to buy the company, they get a company bound to an obligation to sell all its assets to the friend, and then the previous owner cooperates in satisfying the condition in exchange for the friend giving them the assets back.
"We'll ban that", you say. But then they'll be more subtle about it, and the only way to really catch them is to have a good way of determining the true value of the company, which was the original problem.
You also run into trouble with that one because people can play that game the other way. You have an asset which on paper should be worth around a million dollars, but its value has already been hollowed out or de facto assigned to someone else without actually transferring the asset. Then the owner declares that it's worth $400,000 and the government pays them $400,000 thinking they're going to make $600,000, only to find out that it's actually worthless.
> 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).
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.
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.
I don't think the percentage has changed since I moved here, though the dollar amount I pay has gone up significantly as the assessed value of my house has risen.
Like with any tax, I'm guessing the rate would change if the county's revenues didn't match their expenses?
In my county, tax rates have to be renewed every year. So every year there's a chance for the rates to change. There is an automatic suggestion of a "no new revenue" option formulated by the appraisal district based on their new assessments, there are then voter approved changes, and then the county (or taxing entity) decides.
My property taxes have practically only gone up over the years, but the tax rates from the various entities have mostly trended downwards.
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. )
Aren’t we then just nullifying the productivity gains that could be had from the technology though? Obviously some people want this, they want AI to be less competitive with human labour, but don’t we just fall behind other nations who don’t tax that way and allow maximum productivity gains in all the AI consuming businesses?
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.
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.
> 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".
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.
Curious, what is your solution to this situation? Imagine all labor has been automated - virtually all facets of life have been commoditized, how does the average person survive in such a society?
I would go further and ask how does a person who is unable to work survive in our current society? Should we let them die of hunger? Send them to Equador? Of course not, only nazis would propose such a solution.
Isn't this the premise of some sci-fi books and such?
(We in some way, in the developed world, are already mostly here in that the lifestyle of even a well-off person of a thousand years ago is almost entirely supported by machines and such; less than 10% of labor is in farming. What did we do? Created more work (and some would say much busy-work).)
Trials show that UBI is fantastic and does bring the best in people, lifting them from poverty and addiction, making them happier, healthier and better educated.
It is awful for the extractive economy as employees are no longer desperate.
Maybe I'm misreading this article, but where does it actually say that anything UBI-related failed? The titular "failure" of the experiment is apparently:
> While the Ontario’s Basic Income experiment was hardly the only one of its kind, it was the largest government-run experiment. It was also one of the few to be originally designed as a randomised clinical trial. Using administrative records, interviews and measures collected directly from participants, the pilot evaluation team was mandated to consider changes in participants’ food security, stress and anxiety, mental health, health and healthcare usage, housing stability, education and training, as well as employment and labour market participation. The results of the experiment were to be made public in 2020.
> However, in July 2018, the incoming government announced the cancellation of the pilot programme, with final payments to be made in March 2019. The newly elected legislators said that the programme was “a disincentive to get people back on track” and that they had heard from ministry staff that it did not help people become “independent contributors to the economy”. The move was decried by others as premature. Programme recipients asked the court to overturn the cancellation but were unsuccessful.
So according to the article, a new government decided to stop the experiment not based on the collected data, but on their political position and vibes. Is there any further failure described in the article?
> 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.
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.
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.
> 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.
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.
Rather, you pay taxes on the income you use to repay the loan. Plus you pay the interest on the loan.
This basically defers the taxes to a later date and charges you interest for 'em. Which might be worthwhile, depending on how quickly and reliably your capital is growing.
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.
My understanding is that it's not subject to the same tax it would have been as income, since the federal estate tax only applies to value above ~14 million per individual. So, my understanding is that a married couple can pass 25 million in stocks to their heirs and pay nearly no taxes on it because it's under the estate tax threshold and the capital gains cost basis got reset on their death. But not everyone can do this because you need enough assets or other business the bank wants to handle for them to be happy lending you money for years, and only people with a lot of assets have either of those things.
(I'm happy to be wrong about this, since it seems unfair, but AFAIK this is how it works?)
I heard from a medium reliable source that this loophole wasn't as popular as the zeitgeist implies. I'd love to know how true that is and if so, how the rich finance themselves.
"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.
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.
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.
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.
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.
> 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.
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.
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.
> 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.
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.
Sure, but that doesn't stop them being taxed under whatever their most recent valuation was under a wealth tax. Just not taxing non-liquid assets would also be an improvement.
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.
People aren't clearly separatable into "owners of capital" vs "workers", you're right, but they don't have to be. You just need to recognize that the role that they play at any given moment can be so categorized. And sometimes they play many roles at once - for example, a company owner who is also its CEO is both a capitalist and a worker, and fair wages that he receives as the latter (fair here meaning that an equally capable manager hired from the side would ask for this much on average) is not a problem.
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.
> If there was no difference between capital and labor, then capital gains and labor income would be taxed at the same rate.
There's a distinction between capital and labor when the terms are used in an accounting sense but when "capital" is used as a shorthand for a class of people, there isn't. Once someone starts talking about "actual workers" vs "owners of capital" they're drawing that distinction.
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.
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.
At federal minimum wage, you make 15k a year. NASDAQ 100 is on average 14.6% per year. It only takes 100k to passively earn more than the vast majority of labor.
We have arrived to the point where capital is vastly more important and productive than labor. AI has only make that worse. Historically, there has been a balance because it was Capital and labor that were required to generate outsized returns. But once you strip out incremental cost with software, and tack on an AI "service" layer, where are the need for employees?
The one saving grace, is that this will also break the VC model. When one youtuber who has 100k subs can spin out 20 different apps a year, we fragment the app space, allowing alot of micro businesses to form around "brands". But "brands" will just be social media influencers.
> 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.
That sounds like the finance bro version of mystical woo. There's nothing special about it. There must be doctors who say diagnosis is an art form. But AI will still out perform the diagnosis.
AI can calculate stuff that can be measured and calculated.
But investing (in stocks or otherwise) is not that. Investing is about the phychology of the people (all other investors). If investors as a whole make stupid decisions, the market movements make their decisions correct (like the incredibly stupid drop in Nvidia's stock due to release of Deepseek). AI can be more objective and better at calculating facts, but it doesn't matter if the market is driven by emotions and people.
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.
Yes this entire conversation is about the ultra wealthy not paying their "fair share". A $14MM exemption is practically irrelevant here.
> most large estates get reorganized into trusts with estate tax avoidance
This isn't so simple. Transfers to a irrevocable trust count against your lifetime 14mm estate and gift tax exemption and a trust in excess of the 14M exemption is subject to gift tax.
Also, this discussion was about "Buy Borrow Die" strategy. Irrevocable trusts don't make much sense in this context because trusts aren't subject to stepped up basis.
> 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
> 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.
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.
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].
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.
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" ...
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.
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).
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.
>>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.
An automatic weaving machine operator, operating a capable machine, produces 3 times as much as the lack of a machine operator. The productivity increase is the operator, not the machine. That's my entire point.
What's different between what I just said and what you just said? Nothing. In fact they can both be true. Both parties can get 3 times as much money as they did previously. Why don't they? Why does one party get 10x and the other party get 0.7x?
If productivity increase is entirely caused by machines, why did it take until 1971 for wages to decouple? The reality is that both workers and owners would like their share to be as high as possible. In 1971, however, owners seized control of the money printer and they never let it go since then.
> Both parties can get 3 times as much money as they did previously.
Increased productivity shifts
the supply curve which will (unless demand has zero elasticity, which is unrealistic) lower the market price of the good. So tripling productivity does not triple the amount of revenue per hour worked.
> Why does one party get 10x and the other party get 0.7x?
Because the people purchasing labor (capital) are able to get the labor they need at that price. Automatic weaving machine operators are trainable, and if they were getting paid 3 times what weavers were paid then people would rush into that space, driving down labor prices—in other words, the supply of automatic weaving machine operators has high elasticity. The demand for automatic weaving machine operators (i.e. the supply of factories full of automatic weaving machines) has much lower elasticity, so capital (demand for labor) gets most of the economic surplus.
It comes down to the capital owners owning the money printer. And nothing else.
I'm aware of a few attempts to create a labour-owned money printer (using the ideas of cryptocurrency) but none that are getting off the ground. Bitcoin is not one - it was a good idea to try, but it got captured by capital just the same as fiat money did.
You can grasp for vague conspiracy theories about “the money printer”, or you can sit down and think about the concrete factors that make demand for labor (i.e. capital investments in buildings and equipment) less elastic than supply for labor. Here are a few:
- It’s fundamentally more difficult to raise and organize millions of dollars to build a factory and fill it with automatic weaving machines than it is for someone to train for a few weeks to become an automatic weaving machine operator.
- Various government regulations, from environmental protections and zoning laws that make it harder to build factories to safety regulations for operating factories, make it harder to open new factories and so decrease the elasticity of labor demand. I want to be explicit here that I am not saying these regulations are bad—but we must recognize the side effects they have.
- Long lead times on capital investments greatly increase the risk of market movements or technological advances making the business plan untenable before it gets off the ground.
- Organizational inertia slows staffing changes. Corporations often make decisions at glacial speeds. Want to hire a new team? Who is going to manage them? Who do they report to? Where will they work? These discussions can take up months, at which point the market has changed and ehhhh maybe we don’t want to hire a new team after all.
- High cost and difficulty of firing people makes hiring for a possibly short-term market opening less attractive. Think union contracts, severance pay, etc. Again, I want to be explicit that I’m not saying these are bad things, but we need to understand the effects they have.
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:
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.
> 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…
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.
I don't understand why socialists or communists don't tax the means of production accordingly, if they don't have money, take partial ownership (or complete ownership and turn it into a co-op or something).
Owners of capital and means of production have succesfully gamed the system and most of the tax burden falls on us middle class idiots that pay taxes on our work.
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.
> 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.
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.
If you are a libertarian and you have give it some thought - the correct amount of taxation is zero on all fronts. Every time you give power to the govt to tax you (or the robots you make) you are dissolving the freedom you process.
( It's another large conversation as to the best ways to sustain the govt)
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).
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?!"
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.
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.
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.
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.
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.
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 $999 million--just outright capped it, and enforced that--it would not impact these people in the slightest.
It would certainly impact their willingness to do the company-building that creates all those innovations and jobs.
With such a rule, Tesla wouldn't exist, no electric cars, no SpaceX, no cheap advanced launch tech; basically most of the modern world would be choked in the crib by taking away the incentive to build it.
If some person isn't willing to do company building because they are already at the cap so it won't make them any more money, that just means that someone else will do that. We have a planet of 8 billion humans; there's no shortage of human talent.
This is an untested assumption, as it takes quite a bit of CapEx without return to start a rocket company, or a tunnel boring company, or a car company.
There's thousands of Einsteins kicking around. The majority of them are in places like India and Africa, not having access to resources that would allow them to realize that potential.
1% of Americans control 30% of the wealth of the nation, and apparently 12% of property.
It's more than reasonable that people with that much wealth to their name pay the vast majority of the taxes, as it used to be.
From a nation building perspective, there's no reason to allow a couple hundred people to wield 52,000,000,000,000$ 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.
> 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 $2,000 per year to live in a rural village.
If you can't afford the fee that's OK, it just means you have to live outside of the developed areas and don't benefit from any services provided by the government. But you are free to set up a tent in the woods and live off the land.
Would this mean that a person that makes 50k/y most pay 20% of their income while a billion$ company still pays 10k? I don't think this helps with wealth inequality.
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.
> 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 we do things how we do 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.
You can progressively tax consumption by combining high, non-progressive consumption tax with negative income tax rates. Something like, everyone gets some small UBI, and also extra income for every dollar made.
For example, let's introduce 35% consumption tax, but introduce $1k/year UBI and extra 30% on income between $0 and $30k, then additional 20% on income between $30k and $60k, and then 10% on income between $60k to $100k, and 0% on any income above that.
Then, if you make $30k, your gross take home pay is actually $30k + $1k + 30% * $30k = $40k, and if you make $200k, your gross take home pay is $200k + $1k + 30% * $30k + 20% * ($60k-$30k) + 10% * ($100k-$60k) = $220k.
At the same time, if you make $30k, if you spend all of it on consumption, you pay 35% * $40k = $14k in taxes, so your net take home pay after taxes is $40k-$14k = $27k. On the other hand, if you make $200k and consume all of it, you pay $77k in consumption tax, and your net take home pay is $220k - $77k = $143k. All very progressive.
Now, the person making $200k is highly incentivised to avoid some of this tax, and instead of consuming all of it, he might only want to consume half of it, and invest the other half. This is great, because then the other half will (hopefully) get invested in a productive activity, so that in future there's even more production.
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.