Normally I don't write so much in a day these days, but after a conversation with another client, I decided to my thoughts down and put it out there. I used to write a lot more in the past, but limit myself heavily. with so much time on my hands today however, I figured, one more can't hurt and I can spend the time on the train back commenting instead.
A few basic assumptions:
Capital gains tax 30%
Corporate tax 20%
Income tax 40%
100 employees earning 100,000 each = 10 million = 4 million income tax.
Company profit is 10 million = 2 million in corporate tax
8 million goes to shareholders = 2.4 million in capital gains tax.
Total tax gain 8.4M
AI/ automation takes 50% of the jobs.
50 employees earning 100,000 each = 5 million = 2 million in tax.
company savings in salary = 5 million profit 15 million = 3 million in tax
12 million goes to shareholders = 3.6 million in tax.
Total tax 8.6M
Unemployment costs per person is 50K x 50 = 2.5 million
Total tax gain = 6.1 million
(with more mouths to feed who have less opportunity to feed themselves)
Now remember that while income tax is generally paid in full, corporate tax is subjected to a lot of rebates and for instance, the cost of AI will become a tax reduction. The average tax paid by fortune 500 companies is around 11%. Also, unlike in Finland, the US for instance has a much lower average capital gains tax - as low as zero. Essentially, what ends up happening is that while a corporation can make more money, it puts more pressure on the tax system and as such, more pressure on taxpayers. Corporations will keep increasing shareholder wealth, shareholders will keep investing and expanding their wealth, demanding increasing profits, costs are deferred through the government tax to taxpayers, and it just spirals year after year, creating larger gaps and more challenges in daily life.
Financial efficiency at creating wealth should not be the goal of the economy. Instead, we should be running the economy to effectively improve wellbeing. It doesn't even matter if what someone is doing is getting overpaid, if it generates wellbeing. But it does matter if someone is getting overpaid and generating harm. For example, it is insane that the tax rate on passive investing is lower than income tax for actively working. It might have made sense at one point to get investment for companies, but that same system is now severely detrimental, as it is out of alignment with what is best for human wellbeing. Investors look for return on investment in the form of financial value, not in terms of human wellbeing. This is a fundamental flaw in the economy in regards to our potential, future, and experience as a individual and species. Yet, we keep doubling down on it, because we have been brainwashed to believe that wealth will eventually be used to improve health - it will not, because that is not the most efficient way to increase wealth.
Financial efficiency is not the goal of an economy, human wellbeing is. Just because we have forgotten this and created a system that focuses solely on the ability to generate monetary wealth, doesn't make it less true. Economy as we know it has always had the purpose of life improvement yet, over the last century or two, we have turned course and have shifted purpose to increasing shareholder wealth, not stakeholder health. We are all stakeholders in this planet and all reliant on the species, yet we are increasingly choosing to focus our potential and resources into areas that run counter to our own best interests.
Profits don't matter.
It is how resources are used that matters, and if those resources are just going to increasing profits, which in turn get reinvested to increase profits again, the economics of it as far as the purpose of improving lives, doesn't add up. It is a bit like winning the lottery, and putting it all under the bed and not changing anything. What was the point of winning?
We have "won the lottery" in terms of our capabilities to think and create, yet we are failing to capitalise on the win because we keep stuffing opportunity under the mattress, pretending that it is meaningful. It is not. It is money, a concept alone, and one that in slightly different conditions, becomes valueless very fast. Instead of sitting on money we generate, we should be generating meaningful life experiences as effectively as possible. Focus on people's health, opportunity, and capacity to think, create and enjoy a decent and relatively stable and safe life.
The grass is greenest where it is watered, and we are feeding the financial economy as humanity withers. It seems crazy to talk about an economy of health, because we have been conditioned that what we are doing now and focusing on wealth generation is our best bet to having it. But that is not the case, because it is designed to consolidate resources into fewer hands, not distribute to where it best serves growth opportunity. If unchecked, it will consolidate all the way down into a monopoly, which in essence will be a centralised system of complete control.
Absolute economic efficiency.
The only hope I have for the future in terms of the direction we are heading with automation, is that it will come up with a system that will optimise for human health across all the factors that matter, no matter the costs. Opportunity is a resource, and we are wasting it while we chase what doesn't matter. And what is pretty incredible, is that the majority of us believe that what we are doing is somehow working, that chasing economic efficiency and wealth is going to result in a better life experience. The truth is though, that the more gaps that are created, the more volatile life becomes and the more negatively impacted we are as communities and individuals. That is about as close to an economic truth as it gets.
Severe inequality doesn't lead to a stronger humanity.
Maybe, just maybe - rather than using all the AI tokens to improve profits, we should be using them to improve people. Some may agree in principle, but principles are valueless without actions that back them up.
Much like money.
Taraz
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