Looking at the actual article, the people suggesting taxes on AI are American Nobel laureate Edmund Phelps, and Bill Gates, founder of MSFT. The Europeans suggest more general taxes on capital instead.
Don't tax tools or income, tax the accumulation of it: wealth.
But either way, taxing the tool is micromanaging the problem, and some powerful people cynically promote that because they can aim the details away from themselves.
In some ways taxing wealth is quite simple, because wealth is already meticulously recorded via contracts and owners go out of their way to estimate the magnitude of their wealth for example to borrow money or for other financial and economic obligations.
Another approach would be to tax capital gains at the same rate as income and introduce additional top brackets. I have a hard time to find a good faith reason for capital gains to be taxed less than labor.
But there are enough other ways where it's really hard and unsolved. Imagine someone bought an $X irreplaceable ancient urn to hold the ashes of their parents.
How do you calculate the $Y "wealth" inside that non-fungible urn on their mantelpiece today? How can one determine which "I would buy that for X" statements are falsely low or falsely high?
> owners go out of their way to estimate the magnitude of their wealth for example to borrow money
I have no inherent problem linking one voluntary claim of wealth to another conclusion of wealth... But what happens when someone wealthy who doesn't actually need any loans applies for them while presenting themselves as a pauper?
Or cases where someone seeks a loan and their rationale is "I may have negative net worth but you'll be made whole because you're first in line", as opposed to "I have high net worth"?
> I have a hard time to find a good faith reason for capital gains to be taxed less than labor.
Consider a small company of AcmeCo with 1-10 workers all dedicated to the art of Acme'ing, each taking tiny wages (but accepting shares) because they believe in the mission and want to launch the company.
On a technical level, anything they (might) get would be capital gains, but clearly it's not the same as passive rents with no labor behind it. It's closer to deferred wages.
I heard that, at least in the US, you can avoid capital tax gain by just... never selling. Borrow against your wealth instead.
If you increase capital gains tax, the more risky ideas will no longer be viable investment vehicles even though some of them would have been successful. Across the entire economy, the net effect will be less innovation, stagnation, and loss of power relative to foreign countries.
Tax rates are carefully tuned to maximize tax revenue without unduly disincentivizing production. To change them purely based on vibes would be catastrophically stupid.
Please don't vote.
You seem to conflate and misunderstand a few things here. For one, capital gains are paid out from profits, so they leave the company's budget and are not part of investment.
Secondly, holding stock and stock trading has been immensely profitable, relatively low risk and require little if done reasonably and over long periods.
More and more studies are affirming that simply buying index funds and holding them over long periods is _less_ risky than buying bonds.
> Tax rates are carefully tuned to maximize tax revenue without unduly disincentivizing production.
They reflect power relations and tax competition more than anything.
> To change them purely based on vibes would be catastrophically stupid.
Not based on "vibes". The people who actually generate wealth are workers and consumers, not stock holders.
> Please don't vote.
We should mutually respect our rights to vote even if we disagree.
I don't really believe it. Investment is always incentivized by tax breaks and other political gifts. But once things turn bad it's the citizen's turn to pay for it. Fire all staff? We pay for unemployment. Pollute the soil? We pay for cleanup. Empty the water table? Guess who's gonna depend on the state for clean water...
> To change them purely based on vibes would be catastrophically stupid.
Please tell that to every neo liberal in my country. Reducing taxes on the rich seems to be their passtime, while every time some kind of capital gain is mentioned, everyone and their dogs become experts in economics and can tell you it's folly.
> Please don't vote.
Please don't look down on others.
I find this argument somewhat unconvincing. Where is most of the wealth? In hard assets, such as real estate and financial assets, such as stocks and bonds. The former are very difficult to hide, for obvious reasons. As for the latter, the ownership of every single share is recorded in large databases (e.g. DTCC, Clearstream and Euroclear). In that sense, the "physical location" of most of the wealth is well known, so in theory it should really not be difficult to tax it.
The unit of account for tax is the currency of the relevant sovereign. Most contracts for income are denominated in that unit of account, even if it is not there is often a highly liquid market (FX) between units of account.
Most wealth is not stored in assets where the unit of account is that of the sovereign. This counts double for assets with a physical location.
This isn't something that can be easily hand-waived away.
My understanding is that you say that taxing things denominated in a foreign currency is difficult? But why? I already pay taxes on my capital gains denominated in a foreign currency (for example dollars). There are official government exchange rates for tax reasons, published daily. I don't see anything to hand wave here, because there's no problem.
It's too easy for people to offer hypothetical prices they'll never have to execute on. You could establish a price by forcing people to sell anything to the highest bidder, but that kinda explodes any conventional idea of property, and now the government is spending all its time running a trillion sketchy auctions while no human has time to do productive work anymore because your neighbor is trying to buy your car for $1 and you need to arrange a more-plausible offer before you lose it.
The point I'm trying to make is that assets such as land are not denominated in any currency and typically end up being held for such large amounts of time with such substantial transaction costs that's there would be a large cost involved in knowing what the value of the thing being taxed is.
If I pay you $100k, £100k or ¥100k we can use spot rates to work out how many € that is within much less than 1%.
If I own a piece of land how would you answer the question, "what should the value for taxation be?"
If you go with the last transaction price then this will have a substantial impact on properties that haven't been sold for a long time and encourage people to enter into transactions that look like sales but aren't (such a 999-year lease).
Leave it up to a government agency to decide and this agency will come under huge pressure to favour one type of activity over another. How do you value land owned by the government? What if that land is privatised? The UK's attempts to deal with this when it privatised BT completely destroyed the fibre to the premises industry in the UK for years.
I completely agree you then. I think people arguing for wealth tax severely underestimate how many edge cases and loopholes there are.
And that's just the legal version.
I know someone who used to work as a business lawyer. She spent years trying to track down the true owners in various cases. At the very least it's an expensive business. And sometimes it just couldn't be done.
Of course governments can cut the knot with physical assets, walk into a building with troops and/or police, and say "This is ours now." Or they can order banks to hand over the money in accounts.
But before they can do that, there has to be some certainty about the owner. And even getting part way there can take a while and cost a lot.
The real problem has always been measuring "current wealth" with accuracy, fairness, and not spending more than you collect on an army of auditors.
I don't see how "flat" makes anything easier, since it's a downstream calculation.
Distribution of wealth is about the distribution of real resources, especially control over human labor. And that underlying thing can always be taxed, optimized, or even repurposed to better serve the needs of society.
Nobody calls alcohol duty “micromanagement”.
For products like petrol, it’s widely known that from money paid for a liter when it’s sold, say, in the UK, more money stays in the UK’s government pocket via a complex web of taxes and duties, than profits the oil production company that supplied crude oil for that petrol.
Maybe taxing a kWh of the AI data center energy consumption should be a thing? I don’t know.
They don't, but it really is! There's different rates for different specific gravity and different processes.
Re: petrol, I note that the UK government is trying to replace this as part of the EV transition with a milage tax, which is proving controversial and fiddly.
Energy tax is a hugely fraught political issue. The "poster child" for cheap energy is a little old lady huddled over a 1kW one bar electric heater. Energy bills are a big "fixed" cost for households. Many small businesses have been affected by energy price rises - e.g. restaurants. And yet at the other end AI represents such a huge deployment of capital expenditure that it's distorting prices for everything else - energy, RAM, and so on.
I think I'd favor a "personal allowance" model similar to income tax, where you get the first X units of energy tax free and then have to pay VAT, carbon taxes etc. on the rest of it.
I can see why this is tempting, but I think there's a better way to legislate with this, especially with that poster child.
I'm a landlord of a flat. I used to live in it before I left the UK. The EPC rating is D, so despite the double glazing it's still pretty cold in winter. I am now living in a fancy new-build in Berlin which, despite being 3 times the size of that flat, can be kept warm for 10 months of the year just by body heat and waste energy from the white goods — even with higher electricity costs in Germany, it costs less to be comfortable in this building in a T-shirt all year round (even while snow is falling outside), than to be wearing fleeces and sleeping with hot water bottles and still not be completely comfortable in that flat in the UK.
A few years back there was a proposal for legislation that would increase the requirements for all rental property to be at minimum C-rated by 2030, as I understand it this was dropped and the current minimum is F or something ridiculous like that. My agent's advice is to not do anything until the legislation is actually sorted, even though I'm happy to spend whatever to upgrade the place, because until you know what the legislation demands there's always a risk of doing the wrong work beforehand, having to rip it out and put something else in.
IMO, government should push for this kind of boost, as it has with other energy-saving and insulation-boosting measures.
My first rental after graduation was a Welsh solid stone wall construction; like the example you gave, I couldn't keep warm there even with the electric bar heater a meter from me.
Like, the housing crisis in the UK, there's a lot of empty houses, they're just in places with no jobs, could encourage employers to go there, but HS2 mumble mumble. Could build more houses, but greenbelt, and existing homeowners like the house prices going up, and lots of builders were Polish and oh look Brexit.
Right now, winter fuel allowance is literally burning money because the houses are not good enough. This is also not sensible.
Thinking about who might benefit from it being a conspiracy, the only finger I can point at would be Russia? (Well, unless it's a long-term generational anger at the British Empire, which I have discovered is more of a thing than most Brits realise).
(Different environmentalist group, different time)
“taxing the tool” makes me think of transaction taxes, like a tobin tax https://en.wikipedia.org/wiki/Tobin_tax
That sounds excellent. Also water usage.
Really, AI has externalities and it should pay for it.
Should an AI data center from pharmaceuticals or biotech startup be taxed extra per kWh, even if the AI is purely used for medical research?
> Should an AI data center from pharmaceuticals or biotech startup be taxed extra per kWh, even if the AI is purely used for medical research?
That's not a gotcha.. those are all policy choices. My personal preference is, yes, of course - medical research today is taxed just fine. If there's lobbying to specifically grant tax benefits to medical research, I can see an exception being carved.
Tax on electricity is already a thing. That can be adjusted and even be made progressive. Extra for fossils and so on.
Depends on the tax. It is a lot easier to move move profits to a low tax jurisdiction than it is to move land or machinery.
> But either way, taxing the tool is micromanaging the problem, and some powerful people cynically promote that because they can aim the details away from themselves.
I definitely agree with that.
There are all sorts of problems. Do you tax this notional "income" where the work is done or where the AI runs or where the company that owns it is incorporated?
I think we have no option other than taxing loans and other money movements like that in sufficiently large scale as ordinary income. If I get a loan for USD 200k for a house once a year, I think it isn't income but if ElMo gets loans worth USD 20M a year, every year, he should pay income tax on all of that as if it was ordinary income. How he pays it? I don't care. Sell some assets. Oh and that sale is also taxable.
It is funny because in the copyright debate, AI is often treated as human. Like "we didn't steal your data, the AI just learned from it!"
Problem solved.
With increased automation, this only gets more extreme.
Taxes on labor are actually a method of extracting money form the rich capital owners.
As you mentioned it's easy for the rich people to hide their wealth and avoid taxes on its growth.
The one thing that was very hard for them to avoid or hide was purchasing labor which they had to do to enlarge their wealth. So governments taxed that.
If governments lowered the taxes on labor it wouldn't mean middle class would earn more. It would only result in capital owners paying less for work. They always pay as little as possible and how little a person is willing to work for is the same, tax or no tax. Because money in hand is what counts.
Of course since as labor is being replaced with automation this way of collecting tax on capital growth becomes less and less feasible, so things are bound to change.
Or perhaps this could serve as a kind of test: a technology that cannot be reliably used in tax evasion enforcement simply isn’t worthy of the name AI.
Or perhaps it reveals that we have structural problems, and certain concentrations of wealth with or without automation are a threat to the just and effective operation of society and should therefore be as vigorously opposed as crime or foreign attacks.
So somewhere along the line it could be very beneficial to be poor on paper.
Or are we going to blame these people for corruption while the (ultra) rich are doing this constantly?
"It's good to be the king!" (Mel Brooks)
Let's say EU and US taxes AI tokens. India doesn't, so almost all prompting done by international companies now is outsourced to India, and still not taxed.
Or do you tax AI companies and tax tokens "at source"? Then, obviously, they either lose competition with foreign (let's say Chinese) companies that do the same but are not taxed, or more likely all AI companies move out of EU and US.
I guess the other countries can slap sanctions on them, but the people benefitting won't care really.
I can only image the Kafkaesque tax code the government would come up with. Then it would create all sorts of weird incentives as companies attempt to minimize tax paid.
This is not a reason to stop taxing (i agree with most here that taxes should be higher), but to design taxes that can't be circumvented easily.