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Payroll taxes are inefficient as they discourage work and increase its cost for employers, leading to lower hiring. If payroll taxes vanishes because of AI, it

Payroll taxes are inefficient as they discourage work and increase its cost for employers, leading to lower hiring. If payroll taxes vanishes because of AI, it doesn't mean that we should stop using it to increase productivity, but rather reorient taxes. For instance, land value tax or consumption taxes are often seen as more efficient and fair, depending on their implementation. They also are AI-proof.

snuxoll 10mo ago
The problem with consumption taxes, as we have seen time and time again, is they disproportionately affect those with lower incomes.
- gjsman-1000 10mo ago
  Do people with lower incomes have the entitlement to all benefits of the state without paying a fair share of their own? If anything, there’s plenty of literature showing that social programs and tax exemptions on the poor make underpaying them possible to begin with. Walmart couldn’t pay $12/hr. if tax exemptions and SNAP and other aid didn’t fill the gap.
  - magicalist 10mo ago
    This seems like an overly complicated phrasing of the much simpler "are progressive taxes and social safety nets actually bad?"
  - AuthAuth 10mo ago
    Yes, all members of the state should benefit from state programs. There is little value in adding an exclusionary check to state programs.
  - snuxoll 10mo ago
    We don't have go go to the extremes of employers that pay what is effectively poverty wages relative to cost of living. The household that brings home $80K/yr would always spend a larger percentage of their income on taxable consumption, than an executive that takes home multiple million per year. Progressive income tax brackets are a better tool for making sure those who are able to pay a larger share of the common good, do so. Unfortunately, we still have not come up with a realistic way to deal with the hoarding of wealth - both by individuals, as well as corporations like Apple with massive warchests. Even some more broadly accepted ideas like a LVT have some issues if the future really does trend towards "AI" displacing people from their jobs. One way or another, the reality is that the tools we have right now have persisted because they do their job well when politicians act in good faith and don't implement poor fiscal policy emphasizing short-term gains that result in long-term pain. But, they're still fundamentally flawed, and something is going to have to change if we do see dramatic changes to society in the coming decade due to developing technologies.
    - AnthonyMouse 10mo ago
      > The household that brings home $80K/yr would always spend a larger percentage of their income on taxable consumption, than an executive that takes home multiple million per year. Progressive income tax brackets are a better tool for making sure those who are able to pay a larger share of the common good, do so. "Progressive income tax brackets" don't actually do this. The people with so much money they can't spend it all use various tax shelters as it is. They typically manage to not even pay tax on the amounts they do spend, because they borrow money and spend it instead of recognizing it as income first. So they would be paying more under a flat consumption tax than they do under the status quo. The "progressive income tax system" doesn't actually work the way it's claimed to. On top of that, the problem is essentially fake. People absolutely can and do spend millions of dollars a year. Cardiologists making seven figures buy huge houses with multi-car garages full of exotic makes etc. It's spending billions of dollars a year that nobody is really going to do, but that's such a tiny percentage of people that it's ridiculous to design a tax system being imposed on everybody else on the basis of that, and those are the exact people who aren't paying the high rates under the existing system anyway. Here's a proposal: Have a flat consumption tax, and then have an income tax where the rate is 0% up to the 99.9th percentile income and only the top 0.1% even have to file a tax return. The latter is going to be avoided in the same ways it is now, but at least then you can't say the billionaires don't have a higher nominal rate, right?
      - twoodfin 10mo ago
        The problem with a consumption tax is not the steady state, but the transition from the current state. How do you take a retiree couple whose main income-earning days are far behind them, and ask them to pay 25% or more on their consumption? Not an impossible problem, but it’s THE problem.
        AnthonyMouse 10mo ago
        Is it though? Both social security and 401k withdrawals are taxed under the existing income tax, so they'd just be paying it as consumption tax instead. Also, aren't people with an enormous amount of stored wealth "the rich"?
  - wahern 10mo ago
    > If anything, there’s plenty of literature showing that social programs and tax exemptions on the poor make underpaying them possible to begin with. That literature is playing fast & loose with terminology to justify a preexisting conclusion. Anyhow, we know what life was like before Great Society programs, and it wasn't higher wages for the poor, we've just forgotten because it's been so successful. That memory hole oddly works in favor of both those who promote expanding welfare and those who oppose it. > Walmart couldn’t pay $12/hr. if tax exemptions and SNAP and other aid didn’t fill the gap. From a basic macro economic standpoint, most welfare programs push wages up by marginally reducing the labor pool. In a free market, how would Walmart be forced to pay a "livable wage" if entitlements didn't exist? Do you really think people would just choose not to work and starve if their wages didn't cover all their expenses? Out of spite? It doesn't make sense, and it certainly doesn't comport with history. It makes even less sense when people buy this argument yet also support minimum wage laws. The counterexample is the Earned Income Tax Credit (EITC). EITC increases as your wages increase, theoretically incentivizing work, rather than diminishing as you earn more. This would increase labor supply. What tends to happen to prices (i.e. wages--price of labor) when supply increases but not demand? Presumably the more cogent literature bemoaning Walmart's labor practices is primarily relying on EITC while hoping the reader glosses over the distinction.
    - AnthonyMouse 10mo ago
      > Anyhow, we know what life was like before Great Society programs, and it wasn't higher wages for the poor, we've just forgotten because it's been so successful. That doesn't tell you the answer because the programs were instituted prior to the productivity increases in the 20th century. Are people better off now than they were before the general availability of electric light or mechanized transportation? Probably, but that doesn't mean you can trace the development of modern agriculture to the existence of SNAP. > In a free market, how would Walmart be forced to pay a "livable wage" if entitlements didn't exist? People frequently have choices between jobs that are easier or otherwise more pleasant and jobs that pay more. For example, long-haul truck drivers get paid significantly more than short-haul drivers, but they also sleep in their trucks and don't get to see their families most nights. Likewise, a lot of jobs require you to get a degree or certification, which can be a lot of work, which people may not be willing to do if they don't need to. If you give them "benefits" then they take the easier job over the better paying one. Which allows the employer offering the easier job to pay less and still get applicants. It also creates a poverty trap if the benefits are contingent on not making more money, because then the compensation advantage of the higher-paying job is much smaller -- in some cases negative. > EITC increases as your wages increase, theoretically incentivizing work, rather than diminishing as you earn more. Except that it does diminish as you earn more, because it has an aggressive phase out. For a single person with no dependents, the phase out kicks in below federal minimum wage. If you had a minimum wage job at 30 hours a week and wanted to work 40 hours, increasing your hours would cause you to receive a smaller EITC. There is a reason the EITC represents ~0.1% of the federal budget, and it's not because it's a bad idea, it's because it's implemented in a way that prevents people from getting much from it.
- nightski 10mo ago
  Yes but ideas exist like FairTax which directly address this issue in some fashion. It's easy to come up with reasons why something won't work, it is a lot harder to find solutions.
- Saline9515 10mo ago
  You can alleviate this by taxing less goods mainly consumed by lower income workers, and handling out social welfare.
QuiDortDine 10mo ago
Sales taxes are regressive and nonsensical, why punish people because they contribute to the economy by buying stuff? Just do income tax.
- nothrabannosir 10mo ago
  I don't disagree with the first part, but income tax falls into the exact same logic of "why punish people because they contribute to the economy by [working]?"
  - QuiDortDine 10mo ago
    Well, we do need taxes. Land taxes are fine too I guess, but I doubt they'll catch on in North America (too many politicians own real estate).
- Saline9515 10mo ago
  You don't contribute by buying stuff but by producing it. And the regressive effect can be reduced by having different rates depending on the type of product.
bawolff 10mo ago
How are sales tax AI proof? AI doesn't tend to buy stuff.
- Saline9515 10mo ago
  AI is used to make products. Those products have to be sold. The revenue from the sales is taxed. Unless you live in a post-money society, as long as there is a monetary exchange you can tax consumption.
BloondAndDoom 10mo ago
Payroll taxes are the worst for small companies followed by strong labor law. Strong Labor laws are good if the company has 500-1000+ people but not able to fire someone within the month with reason is just dumb (I’m looking at Europe). It indeed causes many startups to hire 50% less people than they can. I honestly don’t understand taxing anyone making less than something like 500K. Don’t tax anyone earns less than this, focus all tax collection to top 1% and all big corps that makes more than 5M a year. With all those resource if this can be collected and obvious loopholes patched that’s it. This would not only bring more tax, but also would fuel massive growth on the bottom line in terms startups and tons of innovation on the medium sized companies.
- Jcampuzano2 10mo ago
  Not taxing anyone under 500k would remove a very large share of tax revenue. Combining that with higher corporate taxes would be nice, but if it got pushed too high (which it would in this scenario) we would simply see corporate flight from the US to elsewhere or it would eliminate practically all the benefit of lower taxes from the less wealthy as the cost of goods would skyrocket. There isn't really a silver bullet unless people in the US as a whole culturally become less consumerist and our entire economy is restructured around that fact.
  - joquarky 10mo ago
    > we would simply see corporate flight from the US Good. If they don't want to pay for the physical and legal infrastructure to make their business possible here, then they can go elsewhere. I'm so tired of this cowardly excuse.
    - _DeadFred_ 10mo ago
      People who also say 'the rich will just stop' ignore that the rich work crazy hard trying to ensure they add to their billions. They already are past the point of noticeable returns for their quality of life, yet they keep at it. In return for their super high taxes we should give them a 'contributor to society' chit or star or something. Then they can gamify over getting chits, instead of hundreds of billions more. I'll happily call Elon a '7 star citizen' and support such a game.
roadbuster 10mo ago
> Payroll taxes are inefficient I agree, but governments intentionally shifted from corporate taxes (taxes on net, corporate income) to payroll taxes (taxes proportional to employee wages) because businesses were either finding creatives ways of deferring/diverting income, or they just weren't taking profit (and, thus, nothing to tax). See the third graph here (yellow line vs. dark blue line) https://taxpolicycenter.org/briefing-book/what-are-sources-revenue-federal-government https://taxpolicycenter.org/briefing-book/what-are-sources-r...
- Saline9515 10mo ago
  Corporate taxes are inefficient as well as they discourage reinvestment by the company, since the State taxes a rake each year. Taxing on dividends paid (and buybacks) is better, even if it leads to higher prices to compensate for the lower capital profitability for shareholders (who compete with bonds).

snuxoll 10mo ago

The problem with consumption taxes, as we have seen time and time again, is they disproportionately affect those with lower incomes.

gjsman-1000 10mo ago
Do people with lower incomes have the entitlement to all benefits of the state without paying a fair share of their own? If anything, there’s plenty of literature showing that social programs and tax exemptions on the poor make underpaying them possible to begin with. Walmart couldn’t pay $12/hr. if tax exemptions and SNAP and other aid didn’t fill the gap.
- magicalist 10mo ago
  This seems like an overly complicated phrasing of the much simpler "are progressive taxes and social safety nets actually bad?"
- AuthAuth 10mo ago
  Yes, all members of the state should benefit from state programs. There is little value in adding an exclusionary check to state programs.
- snuxoll 10mo ago
  We don't have go go to the extremes of employers that pay what is effectively poverty wages relative to cost of living. The household that brings home $80K/yr would always spend a larger percentage of their income on taxable consumption, than an executive that takes home multiple million per year. Progressive income tax brackets are a better tool for making sure those who are able to pay a larger share of the common good, do so. Unfortunately, we still have not come up with a realistic way to deal with the hoarding of wealth - both by individuals, as well as corporations like Apple with massive warchests. Even some more broadly accepted ideas like a LVT have some issues if the future really does trend towards "AI" displacing people from their jobs. One way or another, the reality is that the tools we have right now have persisted because they do their job well when politicians act in good faith and don't implement poor fiscal policy emphasizing short-term gains that result in long-term pain. But, they're still fundamentally flawed, and something is going to have to change if we do see dramatic changes to society in the coming decade due to developing technologies.
  - AnthonyMouse 10mo ago
    > The household that brings home $80K/yr would always spend a larger percentage of their income on taxable consumption, than an executive that takes home multiple million per year. Progressive income tax brackets are a better tool for making sure those who are able to pay a larger share of the common good, do so. "Progressive income tax brackets" don't actually do this. The people with so much money they can't spend it all use various tax shelters as it is. They typically manage to not even pay tax on the amounts they do spend, because they borrow money and spend it instead of recognizing it as income first. So they would be paying more under a flat consumption tax than they do under the status quo. The "progressive income tax system" doesn't actually work the way it's claimed to. On top of that, the problem is essentially fake. People absolutely can and do spend millions of dollars a year. Cardiologists making seven figures buy huge houses with multi-car garages full of exotic makes etc. It's spending billions of dollars a year that nobody is really going to do, but that's such a tiny percentage of people that it's ridiculous to design a tax system being imposed on everybody else on the basis of that, and those are the exact people who aren't paying the high rates under the existing system anyway. Here's a proposal: Have a flat consumption tax, and then have an income tax where the rate is 0% up to the 99.9th percentile income and only the top 0.1% even have to file a tax return. The latter is going to be avoided in the same ways it is now, but at least then you can't say the billionaires don't have a higher nominal rate, right?
    - twoodfin 10mo ago
      The problem with a consumption tax is not the steady state, but the transition from the current state. How do you take a retiree couple whose main income-earning days are far behind them, and ask them to pay 25% or more on their consumption? Not an impossible problem, but it’s THE problem.
      - AnthonyMouse 10mo ago
        Is it though? Both social security and 401k withdrawals are taxed under the existing income tax, so they'd just be paying it as consumption tax instead. Also, aren't people with an enormous amount of stored wealth "the rich"?
- wahern 10mo ago
  > If anything, there’s plenty of literature showing that social programs and tax exemptions on the poor make underpaying them possible to begin with. That literature is playing fast & loose with terminology to justify a preexisting conclusion. Anyhow, we know what life was like before Great Society programs, and it wasn't higher wages for the poor, we've just forgotten because it's been so successful. That memory hole oddly works in favor of both those who promote expanding welfare and those who oppose it. > Walmart couldn’t pay $12/hr. if tax exemptions and SNAP and other aid didn’t fill the gap. From a basic macro economic standpoint, most welfare programs push wages up by marginally reducing the labor pool. In a free market, how would Walmart be forced to pay a "livable wage" if entitlements didn't exist? Do you really think people would just choose not to work and starve if their wages didn't cover all their expenses? Out of spite? It doesn't make sense, and it certainly doesn't comport with history. It makes even less sense when people buy this argument yet also support minimum wage laws. The counterexample is the Earned Income Tax Credit (EITC). EITC increases as your wages increase, theoretically incentivizing work, rather than diminishing as you earn more. This would increase labor supply. What tends to happen to prices (i.e. wages--price of labor) when supply increases but not demand? Presumably the more cogent literature bemoaning Walmart's labor practices is primarily relying on EITC while hoping the reader glosses over the distinction.
  - AnthonyMouse 10mo ago
    > Anyhow, we know what life was like before Great Society programs, and it wasn't higher wages for the poor, we've just forgotten because it's been so successful. That doesn't tell you the answer because the programs were instituted prior to the productivity increases in the 20th century. Are people better off now than they were before the general availability of electric light or mechanized transportation? Probably, but that doesn't mean you can trace the development of modern agriculture to the existence of SNAP. > In a free market, how would Walmart be forced to pay a "livable wage" if entitlements didn't exist? People frequently have choices between jobs that are easier or otherwise more pleasant and jobs that pay more. For example, long-haul truck drivers get paid significantly more than short-haul drivers, but they also sleep in their trucks and don't get to see their families most nights. Likewise, a lot of jobs require you to get a degree or certification, which can be a lot of work, which people may not be willing to do if they don't need to. If you give them "benefits" then they take the easier job over the better paying one. Which allows the employer offering the easier job to pay less and still get applicants. It also creates a poverty trap if the benefits are contingent on not making more money, because then the compensation advantage of the higher-paying job is much smaller -- in some cases negative. > EITC increases as your wages increase, theoretically incentivizing work, rather than diminishing as you earn more. Except that it does diminish as you earn more, because it has an aggressive phase out. For a single person with no dependents, the phase out kicks in below federal minimum wage. If you had a minimum wage job at 30 hours a week and wanted to work 40 hours, increasing your hours would cause you to receive a smaller EITC. There is a reason the EITC represents ~0.1% of the federal budget, and it's not because it's a bad idea, it's because it's implemented in a way that prevents people from getting much from it.
nightski 10mo ago
Yes but ideas exist like FairTax which directly address this issue in some fashion. It's easy to come up with reasons why something won't work, it is a lot harder to find solutions.
Saline9515 10mo ago
You can alleviate this by taxing less goods mainly consumed by lower income workers, and handling out social welfare.

QuiDortDine 10mo ago

Sales taxes are regressive and nonsensical, why punish people because they contribute to the economy by buying stuff? Just do income tax.

nothrabannosir 10mo ago
I don't disagree with the first part, but income tax falls into the exact same logic of "why punish people because they contribute to the economy by [working]?"
- QuiDortDine 10mo ago
  Well, we do need taxes. Land taxes are fine too I guess, but I doubt they'll catch on in North America (too many politicians own real estate).
Saline9515 10mo ago
You don't contribute by buying stuff but by producing it. And the regressive effect can be reduced by having different rates depending on the type of product.

bawolff 10mo ago

How are sales tax AI proof? AI doesn't tend to buy stuff.

Saline9515 10mo ago
AI is used to make products. Those products have to be sold. The revenue from the sales is taxed. Unless you live in a post-money society, as long as there is a monetary exchange you can tax consumption.

BloondAndDoom 10mo ago

Payroll taxes are the worst for small companies followed by strong labor law. Strong Labor laws are good if the company has 500-1000+ people but not able to fire someone within the month with reason is just dumb (I’m looking at Europe). It indeed causes many startups to hire 50% less people than they can. I honestly don’t understand taxing anyone making less than something like 500K. Don’t tax anyone earns less than this, focus all tax collection to top 1% and all big corps that makes more than 5M a year. With all those resource if this can be collected and obvious loopholes patched that’s it. This would not only bring more tax, but also would fuel massive growth on the bottom line in terms startups and tons of innovation on the medium sized companies.

Jcampuzano2 10mo ago
Not taxing anyone under 500k would remove a very large share of tax revenue. Combining that with higher corporate taxes would be nice, but if it got pushed too high (which it would in this scenario) we would simply see corporate flight from the US to elsewhere or it would eliminate practically all the benefit of lower taxes from the less wealthy as the cost of goods would skyrocket. There isn't really a silver bullet unless people in the US as a whole culturally become less consumerist and our entire economy is restructured around that fact.
- joquarky 10mo ago
  > we would simply see corporate flight from the US Good. If they don't want to pay for the physical and legal infrastructure to make their business possible here, then they can go elsewhere. I'm so tired of this cowardly excuse.
  - _DeadFred_ 10mo ago
    People who also say 'the rich will just stop' ignore that the rich work crazy hard trying to ensure they add to their billions. They already are past the point of noticeable returns for their quality of life, yet they keep at it. In return for their super high taxes we should give them a 'contributor to society' chit or star or something. Then they can gamify over getting chits, instead of hundreds of billions more. I'll happily call Elon a '7 star citizen' and support such a game.

roadbuster 10mo ago

> Payroll taxes are inefficient I agree, but governments intentionally shifted from corporate taxes (taxes on net, corporate income) to payroll taxes (taxes proportional to employee wages) because businesses were either finding creatives ways of deferring/diverting income, or they just weren't taking profit (and, thus, nothing to tax). See the third graph here (yellow line vs. dark blue line) https://taxpolicycenter.org/briefing-book/what-are-sources-revenue-federal-government https://taxpolicycenter.org/briefing-book/what-are-sources-r...

Saline9515 10mo ago
Corporate taxes are inefficient as well as they discourage reinvestment by the company, since the State taxes a rake each year. Taxing on dividends paid (and buybacks) is better, even if it leads to higher prices to compensate for the lower capital profitability for shareholders (who compete with bonds).