The Economist: AI could blow a hole in tax systems built on wages (opens the source in a new tab)
- The Economist argues rich-country tax systems are complex, unfair and full of perverse incentives, and are unprepared for rising debt costs and weak growth.
- Taxes on work raise about half of OECD revenue. If AI shrinks wages’ share of income, revenue falls just as benefit costs rise, and AI agent AI software that takes actions on its own, like booking, buying or moving money, not just answering questions. could find new ways to avoid tax.
- Its prescription: lighter taxes on work, more on spending with fewer exemptions, higher capital-gains taxes on outsized returns, and far simpler tax codes, rather than wealth taxes.
- ~50%
- OECD revenue from labour taxes
Why it matters For salaried readers in India and the US, the tax mix matters: if governments shift from income to spending and capital gains, take-home pay, prices and investment returns all change.
Other side Taxes on spending fall hardest on poorer households, and AI may lift growth enough to ease the squeeze. The piece also rejects wealth taxes that many voters favour.