Income tax might be scrapped in 5 years. Reason? AI
What's the story
Tom Blomfield, the founder of UK-based online bank Monzo, has warned that income tax may be replaced by a levy on artificial intelligence (AI) infrastructure within the next five to six years. He made this prediction during a recent episode of The Rest is Money podcast. Blomfield said, "I don't think we'll tax human labor, we will tax compute, (meaning systems like) data centers, and then we will use the proceeds to pay for government."
Employment shift
AI's rapid advancement and potential to displace jobs
Blomfield emphasized that AI systems are already outperforming humans in specific tasks. He also said many white-collar jobs, including tax accounting, could soon need fewer workers. "These AI tools are performing beyond university professor level; they are actually beating humans in narrow domains," Blomfield said. He added that while these tools aren't generalizable yet, their rapid progress indicates they will be by the end of 2026.
Job impact
Spotify highlights AI's role in their engineering workflow
Blomfield's comments come amid concerns over AI's potential to disrupt employment. Spotify co-CEO Gustav Soderstrom revealed during the company's Q4 earnings call that AI is now an integral part of their engineering workflow. He said, "Our most experienced developers have not written a single line of code since December." This highlights how advanced AI has become in performing tasks traditionally done by humans.
Job market
Job ads for entry-level positions drop by 35%
A report by Adzuna revealed that job ads for entry-level positions have dropped by 35% since November 2022, when ChatGPT launched. Morgan Stanley also warned that the UK could be particularly vulnerable to an AI-driven jobs shock due to its reliance on professional services. The services sector accounted for 81% of the UK's economic output last year, suggesting a potential widespread disruption from AI adoption.
Taxation proposal
OpenAI suggests 'robot tax'
Last week, OpenAI suggested in a paper that policymakers might need to consider taxing capital, corporate profits, and long-term AI-driven returns. This could include a "robot tax" on automated labor.