Quote of the day

Governments tax labor at much higher rates than capital for what used to be good reasons: labor is less mobile, making such taxes easier to collect, and capital investments tend to boost human productivity and wages, meaning that taxes on labor indirectly capture the upside from capital spending. But if machines start to replace humans rather than complement them, levies focused on labor may fail to capture revenues from AI-generated growth, leaving governments without the resources needed to help the losers in AI disruption. Meanwhile, heavy labor taxes add to companies’ incentives to replace workers with machines, accelerating displacement and driving up unemployment. If the AI industry’s own projections of mass job displacement prove even half true, taxes on labor that accelerate firings will cause voters to revolt against the entire AI project.

~Sebastian Mallaby

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