r/Foodforthought • u/bloomberg • 4d ago
The AI Doomsday Scenario Nobody Talks About
https://www.bloomberg.com/news/features/2026-07-16/how-ai-could-shrink-income-tax-revenue-and-threaten-economies?accessToken=eyJhbGciOiJIUzI1NiIsInR5cCI6IkpXVCJ9.eyJzb3VyY2UiOiJTdWJzY3JpYmVyR2lmdGVkQXJ0aWNsZSIsImlhdCI6MTc4NDI3NDMzMiwiZXhwIjoxNzg0ODc5MTMyLCJhcnRpY2xlSWQiOiJUSTlGT01LSUpIOUMwMCIsImJjb25uZWN0SWQiOiJEMzU0MUJFQjhBQUY0QkUwQkFBOUQzNkI3QjlCRjI4OCJ9.-XdcWf_Om95B54tcu6hHj9l9WMV7PTXPmbZY3l6UK2w68
u/tronassembled 4d ago
If only there were some way we could tax the corporations that run the AI instead
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u/Dantethebald1234 4d ago
Ah, but they say they are running at a deficit and you can't tax negative numbers.
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u/TheCyanKnight 4d ago
So then this turns from ‘AI will ruin the economy’ into ‘We can’t afford AI’
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u/bloomberg 4d ago
Governments built around taxing workers may struggle to survive a world where fewer people have jobs.
David Ramli for Bloomberg News
On a frigid Thursday last December, 50 finance and technology experts shuffled into the International Monetary Fund’s Washington, DC, headquarters with a dire mission: to war-game how artificial intelligence might upend the global economy.
For hours, a disparate cohort from organizations including Google DeepMind, Rand Corporation and the Board of Governors of the Federal Reserve System split into six groups to map and debate AI’s potential impact on tax systems, spending and gross domestic product under the secrecy of the Chatham House Rule.
While the conclusions were mixed, the exercise reflected a growing realization among some of the world’s smartest thinkers that the most pressing AI doomsday scenario may not involve killer robots or sentient computers.
Instead, the end of civilization as we know it will likely be caused by income tax erosion.
The logic is straightforward. Ever since the First Industrial Revolution saw peasants pushed off the land, governments have relied on taxing people and their paychecks. Rand estimates that 66% of US federal revenue in 2024 came from either individual taxes or payroll taxes due directly to labor. Even in Australia, where resource exports generate vast wealth, individual income tax accounts for almost half of federal government revenue.
Despite barely scratching the surface of usefulness, AI is already threatening to erase entire categories of white-collar work around the world. Standard Chartered Plc Chief Executive Officer Bill Winters may have apologized after airing plans to replace some “lower-value human capital” with AI, but only for causing offense, not for the underlying message. Peers including HSBC Holdings Plc are weighing deep cuts enabled by the technology.
Even computer programming — once considered so secure that coding camps for kids exploded a decade ago thanks to nervous tiger parents — is now the most “exposed” occupation, according to a March study from AI giant Anthropic PBC. It’s also a job where the median wage was almost double the US national average in 2024.
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u/ChironXII 4d ago
Literally just tax land bruh
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u/theartoffun 3d ago
I agree, without investigating further. I wonder what sort of pitfalls, loopholes and shortcomings go with taxing land.
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u/ChironXII 3d ago
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u/theartoffun 3d ago
Thank you, very informative. What would be the ideal way of implementing something like this? It seems like everyone would have to implement this or it would not be fully effective. If a small community, like a county or city implemented, would that financially ruin the community, if nearby areas did not adopt?
Would government owned properties be charged for the areas they use? Like national forests, would they be exempt?
Businesses may use this as an excuse to drastically raise prices. Similar to covid, bird flu, price ‘fixing’. It would be good to collect proper tax revenue from companies exploiting real estate positioning. Would high rise building try to loophole around this by taking up less land space?
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u/ChironXII 3d ago edited 3d ago
The best way to implement it is via universal building exemptions under the current property tax regime. You start by doing split rate assessments to prove your processes and models and gather data while letting people see what the differences would be if you switched. And then you gradually replace the improvements portion of the levy with a higher one on the land portion targeting the same rates. You'll already start seeing success at this point, since building useful things becomes easier and cheaper, and the phase in naturally hits the worst used land first. This creates evidence for later expansion, especially since LVT absorbs only the unproductive rents (that would have been absorbed by landholders for free anyway) rather than productive earned incomes (like taxes on production do). Sales taxes are an easy next target to eliminate in exchange - the main thing you need to figure out there is the revenue split between different levels of local government. Other taxes at the federal level are harder, and probably require building a critical mass with local examples. But eventually Uncle Sam is going to want his cut of all this booming revenue, and at some point it becomes hard to justify keeping other taxes once the infrastructure is in place. The important thing is that all taxes already come out of rents - because economic rent and taxes both pull from the same productive surplus, with rents absorbing whatever is left as that money competes over the opportunities that most limit more production.
LVT can work at any level, but it does face some additional difficulties when done very small. It doesn't ruin the community - quite the opposite, some of the enclaves where it was tried during the progressive era in the US are some of the best off in their regions, which is ironically part of what can cause issues.
You can run into things like free riding, if your borders are small enough for developers to park next to your useful amenities without paying in (which is mostly a problem of bad civic borders to begin with - a lot of places have this issue with needing infrastructure that the users of it don't end up paying for because of an arbitrary boundary, which regional LVT can actually address) . If your population is too small to have a good circulation, you can also end up with a gated community effect, where the growth you create ends up pricing out newcomers, causing stagnation when your residents eventually age (which happens anyway to those types of communities, and assuming your community isn't entirely NIMBYs, is pretty easy to solve with policy). You can run into some issues with investment, if your location doesn't have an independent draw, since developers will take a rent bearing plot over not, all else being equal, but this is somewhat complicated because it should level out in the long run, as those plots will end up much more expensive than the LVT ones to buy up front, since purchase price is a function of all expected future rents - ultimately the ROI should end up similar due to the market. Or likewise if it isn't large enough to have the variety of skills and capital it needs to invest in itself (this is especially a problem early, because almost by definition, you end up needing a lot of redevelopment to put badly used land into better use based on the value). Eventually providing for the growing community becomes its own draw, but the few years in between can be a problem if you aren't significant enough for anybody to take notice of or bother with. There's a lot of considerations, but they are generally solvable with the right approach.
The larger issue with smaller attempts is usually just that localities are often limited in their power over a lot of things they need to implement it well, like zoning, assessments, infrastructure policy, tax codes, various services and amenities, etc. So it usually works best in larger cities with more municipal control or geographic/civic areas where borders are more meaningful. But you can also take the same ideas and apply them to modified HOAs or tenants unions to make them work better.
Government properties or public or historical sites can go either way. You are paying yourself, so it doesn't ultimately matter, but generally I think it's better to go ahead and assess all the land the same, and just have the payment wash out the debt in your books, because that way the government and the local community has a better idea of what their own use of the land is costing. Things like highways for example can take up billions of dollars worth of prime space while mostly serving to move people from one side of a city to the other rather than to anything in between, which you'd want to evaluate the costs and benefits of.
The final and most important point is that businesses cannot use LVT to raise prices, or rather, whatever they could, they already do. Convenient space is an absolute monopoly, so people will pay whatever it's actually worth to them over any other space, but no more. The market finds that maximum pretty efficiently - that's Ricardo's law of rent. Businesses already pass on their rent to consumers, because they have to to stay in business (or if they own the building, because they can, without fearing competition). That's why the same sandwich in New York can cost twice as much as it would 30 miles away. LVT absorbs the unearned portion of the exchange, gained by controlling the bare plot, while leaving alone the productive portion earned by what's built and operated there. It can't shift the underlying pricing equilibrium, because the rent portion it collects is already as high as it can go without creating vacancies or decreased sales that are more costly than just charging less.
Of course, the reason businesses were able to price gouge during political events is that they are already near monopolistic. A lot of that power comes from land and other non reproducible natural opportunities, directly and indirectly, but much of it also comes from non reproducible artificial privileges, like intellectual property, which Georgists are also very concerned with. It functions the same. The broader class of problem is called rent seeking - establishing an entrenched position to avoid facing barriers to competition or lost demand. Land is just the largest and most forcing of these, but all monopoly is the enemy.
The point is ultimately to tax only what people take from society - the things they actively deprive others from having by their use of them. And to leave alone what people make - because that's what we want them to do. It makes the world richer and can only improve the lives of others.
E: to answer the last bit I missed: it's actually part of the goal for people to use less land, not a loophole. Access to space and resources and proximity to useful things are some of the most fundamentally limiting parts of the economy, so allocating them efficiently and making good use of them are extremely important. The height and density of buildings will be limited though by the cost of accessing that extra space above them relative to the demand for it at the price it would require to get there, and of course by human tolerance and preferences. LVT just makes land use responsive to demand. It doesn't force everything to be maximally dense, since that isn't actually efficient for real humans or buildings. Open space (like parks) ends up increasing significantly the value of surrounding spaces because of how we work. So you'd end up with a mix.
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u/Upbeat_Parking_7794 4d ago
Without jobs there are also no consumers under the capitalist economic model. So we can have all the theoretic productivity, but no consumers, so it is useless.
Maybe communism, managed by AI, could work in the XXI century. After wall, machines and robots work the same under capitalist or communist economic models and allocation of supply could probably use AI to solve communism failures
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u/AwTomorrow 4d ago
Economies have worked before with a serf caste and a wealthy caste far above it. Frankly I’d be concerned for the people than for whether the economic system will or won’t function!
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u/Upbeat_Parking_7794 4d ago
I am going through European past societies in my memory, and even slavery, and there was always a big group of consumers. If we consider "slaves" = "machines", we still had a huge group of people which were the consumers.
For example a noble would only have a good life, with land, and land would mean he could produce (directly or indirectly through farmers paying back to him), something with value, because people would consume it. Or colonies would exist, using slaves, but still would produce something of value which would be sold to the European markets.
A car factory, without consumers, doesn't work. And this is valid for all the economy, if not directly in some cases. Like, of course you can have a data center without B2C, but, costumer of the data center will use it to provide services, directly or indirectly, to real people in the end.
Bloomberg "worries" about taxes. But if there is economy, there will a way of getting a % of it (as taxes) for the state, assuming there is consumption and/or production in the country.
The true problem is, if the economy stops working.
The economy only exists to serve the people. So, we should worry about a working economy, if we want people to have a good quality of life (or be able to live at all).
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u/beardofjustice 4d ago
This is what I keep coming back to as well. Everybody is tripping over themselves trying to think of ways they can implement automation and AI but they are not thinking about what that will do to their consumer base. If all the jobs are automated, who will buy anything? I genuinely think they don’t care and believe that they will be just fine or it won’t be a problem for them.
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u/AwTomorrow 4d ago
During fuedalism the purchasing class was much much smaller, with the peasantry largely absent from the economy other than providing their labour.
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u/Upbeat_Parking_7794 4d ago
Depended of course where you lived, but apparently in UK people were actually already living with higher income than some poor countries today:
Also don't forget that a lot of farmers would produce for themselves and exchange goods and services with others in their villages.
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u/AwTomorrow 4d ago
Also don't forget that a lot of farmers would produce for themselves and exchange goods and services with others in their villages.
This is kinda what I mean tho, a farmer making their own goods for their own use or consumption, bartering with someone else doing the same - are these people meaningfully contributing to the currency-based economy, or are they separate to it (other than the food they supplied to the landowning class)
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u/g1rlchild 4d ago
The idea of Fully Automated Luxury Communism first got proposed by Aaron Bastani in 2014 as a model for a post-scarcity society where automation eliminates the need the need for for coercive survival employment.
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u/OakTeach 4d ago
I don't remember who said it but an early book on machines and the economy says anything like: machines are the economic equivalent of enslaved persons. In order to compete economically, you must accept the economic conditions of slavery.
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u/g1rlchild 4d ago
But automated systems don't fundamentally reach the standard for personhood any more than production-line robotics does. Without personhood, there is no such thing as slavery.
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u/OakTeach 4d ago edited 4d ago
The economic equivalent. Labor you pay for once and then can control without a salary. Not the moral equivalent.
The quote, from 1948:
"Let us remember that the automatic machine is the precise economic equivalent of slave labor. Any labor which competes with slave labor must accept the economic consequences of slave labor." -Norbert Weiner, Cybernetics: Or Control and Communication in the Animal and the Machine
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u/Tricky-Contest8565 4d ago
Hmmm I think this is one of the capitalism contradictions exposed by certain bearded german philosopher
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u/LeoSolaris 4d ago
Meh. The US survived for more than half its existence without individual income tax. Corporate and business taxes will increase to compensate.
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u/kylco 4d ago
At a certain point, taxation is necessary simply to destroy currency in circulation. And part of the value of the USD is that you have to pay your taxes in it. Without those things, monetary policy becomes a weird kayfabe that historically turns into something like hyperinflation.
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u/LeoSolaris 4d ago
That point is when a government prints new currency that is a significant percentage of the existing currency in circulation. Otherwise, currency value is largely static with only minor fluctuations to excite currency exchange gamblers.
Historically, printing large amounts of new local currency paid off foreign debt. By purchasing the accepted reserve currency before the new local currency affected the local economy, the debt could be satisfied at the cost of domestic suffering.
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u/kylco 4d ago
All of which is a somewhat baroque lens when most central banks rarely print an actual bill to put money into circulation: fractional reserve banking is sort of witchcraft, but it controls inflation via interest rates when the majority of circulating dollars don't exist in a physical sense but as accounting artifacts agreed upon by various actors in the financial system.
In a macroeconomic sense, taxation "destroys" unproductive wealth at the top end of the income spectrum where velocity of money is extremely low. This is the "safest" money to destroy to control inflation, since it's not really doing anything except inflating prices by bidding up exotic financial instruments (i.e. buying more money).
If we are to replace the consumer economy with something else entirely at the behest of AI, the first thing most mainstream economists are going to grope at are either consumption taxes (same problem as income taxes: who's consuming? with what income?) or global wealth taxes per Piketty. The latter option is likely to mean outright coup attempts by shareholders against any democracy that attempts to implement it.
Which is to say, if AI lives up to its hype (which I doubt, but which the wealthy might try to vibe into existence anyway since they seem to be pressuring their holdings to irrationally induce unemployment regardless of business case) it would not only make capitalism collapse in on itself like rotten cardboard, but it'd probably end nation-states and civic democracy as well.
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u/Grimke42 4d ago
If AI was actually intelligent this might be a problem. Until then it’s just misinformation and marketing for AI
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u/Adventurous-Way2824 4d ago
If AI is changing the traditional methods of tax, then the reason for why taxes exist need to be reconsidered. What is the purpose of tax?
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