Money is fungible. It’s kind of stupid that we have an ‘income tax rate’ and then a ‘medicare tax’ on top of it that we pretend isn’t part of the income tax. And it’s a nice little fiction that payroll taxes pay for social security benefits. Yes, technically this could make the Social Security fund ‘insolvent’ or whatever, but then you ignore that and write the checks anyway and nothing happens.
No, Yglesias’s point is not invalidated by the fungibility of money. (It’s generally a good idea to think twice before concluding that an economics-y writer is making such a basic mistake.) Payroll taxes make up 35% of all federal revenue. The point is that a large dip in payrolls has a major impact on overall revenue. If it gets large enough, even increasing rates on current taxes would probably not be enough to make up for it. We may need to add a VAT or other new revenue sources. Try having a discussion with Opus about it. Here’s one I had recently: https://claude.ai/share/7f0707e6-52b2-423e-9587-07cbeee86df0
Our system is basically set up to not tax capital, specifically because we don’t want to discourage investment (or encourage capital flight). When income is diverted from workers to OpenAI, it may not be taxed at all for the foreseeable future—until their costs of building and operating ever more compute stop outstripping their revenues. So a new form of tax is needed, and what happens in the interim while such a thing gets passed through Congress and implemented?
No, Yglesias’s point is not invalidated by the fungibility of money. (It’s generally a good idea to think twice before concluding that an economics-y writer is making such a basic mistake.) Payroll taxes make up 35% of all federal revenue. The point is that a large dip in payrolls has a major impact on overall revenue. If it gets large enough, even increasing rates on current taxes would probably not be enough to make up for it. We may need to add a VAT or other new revenue sources. Try having a discussion with Opus about it. Here’s one I had recently: https://claude.ai/share/7f0707e6-52b2-423e-9587-07cbeee86df0
Our system is basically set up to not tax capital, specifically because we don’t want to discourage investment (or encourage capital flight). When income is diverted from workers to OpenAI, it may not be taxed at all for the foreseeable future—until their costs of building and operating ever more compute stop outstripping their revenues. So a new form of tax is needed, and what happens in the interim while such a thing gets passed through Congress and implemented?