Taxation

Taxation: rethinking who pays for what in the era of automation

The modern tax system was designed for a world that is rapidly disappearing. Built around taxing labour income (income tax, social security contributions, payroll taxes), it depends structurally on a society in which most economic value is produced by humans working for wages. As artificial intelligence and robotics begin to displace human labour at an accelerating pace, the foundations of the fiscal contract begin to crack: companies generate enormous value with fewer workers, capital concentrates faster than ever before, and traditional tax bases erode.

This page covers two complementary debates that any serious tax policy for the twenty-first century must address. The first is how to tax automation and artificial intelligence — the contemporary debate about whether and how to tax robots, AI systems, and the extraordinary value being captured by the technology sector. The second is Georgism — the classical tradition founded by Henry George that argues for shifting the tax base away from work and production and onto unimproved land value and other forms of economic rent. These two debates converge on a single insight: when the source of value generation changes, the source of public revenue must change with it.

Taxing Automation and AI

The idea of taxing robots and AI systems is no longer the preserve of futurists. In 2017, Bill Gates publicly proposed that companies deploying automation should pay taxes equivalent to the income taxes their displaced human workers would have paid. The proposal was rejected by the European Commission the same year but has remained a live debate ever since. With the explosion of generative AI from 2022 onwards and the rapid concentration of value in a handful of US tech giants, the conversation has become more urgent. The IMF, the OECD, the European Parliament and a growing number of academic economists are now examining how the existing tax framework needs to be redesigned for an economy in which large fractions of value-added are produced by capital and intellectual property rather than by labour.

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Georgism

Henry George (1839–1897) was an American political economist whose 1879 book Progress and Poverty sold more copies in the late nineteenth century than any other book except the Bible. His central argument: as economic progress increases productivity, land values rise — capturing the gains for those who happen to own land, while wages stagnate. His proposed solution was to abolish all taxes on labour and capital, and replace them with a single tax on the unimproved value of land. The intuition: land is fixed in supply, its value derives largely from the surrounding community, and taxing it does not reduce productive activity (unlike income tax, which discourages work, or sales tax, which discourages consumption).

George’s ideas have enjoyed a notable revival in the twenty-first century, partly because they offer answers to problems modern economics struggles with: housing affordability, urban sprawl, the concentration of wealth, and the question of how to tax value that derives from natural monopolies (spectrum, intellectual property, data, attention). Many transhumanists find Georgism attractive because it provides a principled framework for a “citizen’s dividend” — a regular payment to all citizens funded by the rents on commonly-owned resources, conceptually close to UBI but with a different fiscal basis.

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