Do tech billionaires dream of shared abundance? We should probably just tax them

On July 24, Elon Musk was interviewed by The Economist’s editor Zanny Minton Beddoes. The 85-minute discussion ranged from Musk’s business ventures to the war in Ukraine, China’s technological power and the immense capabilities of artificial intelligence. Pressed by Beddoes on how his companies will make money in the future, he boldly prophesied that “money won’t matter in 2036”. Musk proposed that within a decade, money for “food, housing, transport, entertainment” will be overabundant. That will be a time where “the robots and AI are providing more goods and services than any human could possibly consume”. And it will produce so much, scarcity will be virtually eliminated, resulting in “incredible abundance for all”. This wasn’t a one-off prediction. Earlier this year, in a podcast interview, he suggested we not “worry about squirrelling money away for retirement”, because in ten or 20 years, “saving for a retirement will be irrelevant”. Review: We Need to Tax Billionaires – Gabriel Zucman (Basic Books) According to Musk, AI will lead us to a “post-scarcity society”. In his techno-utopian future, work will be optional. All will be well, Musk claims, so long as we have AI that “has good values, that cares about humanity and that wants us to be happy and prosper”. Trust me, I’m a tech billionaire Before we all rush out and empty our savings accounts, we might well ask what mechanisms will translate the abundance generated by technology into a society where, as Musk promises, “everyone can have a penthouse”. Musk’s explanation was posted on X last April: Universal HIGH INCOME via checks [cheques] issued by the Federal government is the best way to deal with unemployment caused by AI. AI/robotics will produce goods & services far in excess of the increase in the money supply, so there will not be inflation. Musk’s optimism is not unique among his fellow tech billionaires. While they disagree on many things, they share a common faith that technological abundance will somehow translate into social abundance. Meta chief executive Mark Zuckerberg’s recent missive The Future is for Everyone presents no less than “a philosophy for how we can best use superintelligence to ensure it improves all of our lives, work, communities, freedom and safety”. In Zuckerberg’s estimation, if “superintelligence beyond human capacity” is available to everybody, the resulting gains in productivity and economic growth will ultimately benefit everyone. Faith in technology is also summoned in venture capitalist Marc Andreessen’s Techno-Optimist Manifesto: We believe there is no conflict between capitalist profits and a social welfare system that protects the vulnerable. In fact, they are aligned – the production of markets creates the economic wealth that pays for everything else we want as a society. What is largely missing from these accounts is any serious proposition for the political and institutional mechanisms through which this abundance will be distributed. The question is pertinent given Musk’s status as the richest person in history. His fortune illustrates the point, as it is not the result of scarcity, but control over assets and government support. Distribution is fundamentally a question of power, ownership and political institutions. The question of distribution It is precisely the question of distribution that Gabriel Zucman addresses in his book We Need to Tax Billionaires. Zucman is not a tech billionaire. He is professor at the Paris School of Economics, a co-director of the World Inequality Lab, and one of the world’s most influential economists working on wealth and taxation. His book wears its heart on its sleeve: we need to tax billionaires. The reason, according to Zucman, is simple. Wealth does not distribute itself. However impressive the productive capacities of AI might become, under the current political arrangements wealth will remain concentrated. We Need to Tax Billionaires is not a dry treatise on the dismal science of taxation. In this short and highly readable book, Zucman offers a provocative account of how the ultra-rich use their power and influence, aided by armies of lawyers and accountants, to minimise their tax obligations and enhance their privileged position. Zucman doesn’t just describe tax avoidance, he quantifies it. He shows that across Europe, the United Kingdom and the United States, it is consistently the case that, in his words, “those at the top of the wealth distribution chain pay virtually no income tax”. What techniques do billionaires deploy to do this that the rest of us can’t access? The most prevalent way, according to Zucman, is to shelter income in personal holding companies, retaining profits in those companies rather than receiving them as income. Meanwhile, their fortunes grow through unrealised and untaxed capital gains as the value of their assets rises. Wealth and power grows. Taxable income all but disappears. Using France as an example, Zucman shows taxation is broadly progressive across the vast majority of the population. Working-class people pay an effective tax rate of around 45%, the middle classes around 50% and the upper classes slightly more. At the very top, however, the pattern reverses. For the “ultra-rich”, the rate falls drastically to 13%. When it comes to income tax alone, the ultra-rich pay just 2%. What this all means is that billionaires are “skirting their responsibilities to make a fair contribution to society”. As Zucman goes on to show, France exemplifies the more general case that “in every country for which data is available, income tax vanishes at the top of the pyramid”. The implications are stark. As Zucman argues: Global tax evasion has been one of the linchpins of rising inequality and government debt worldwide. It has also led many to lose hope in the very possibility of a fairer society, creating a breeding ground for the reactionary political movements that are thriving today. There is nothing here of the shared abundance promised by the tech billionaires. Instead, Zucman shows how extreme wealth reproduces itself, and how those who possess it deploy considerable resources to take an unequal status quo and make it even less equal. Zucman is not arguing the economy should be restructured so as to abolish the existence of billionaires. Neither is he suggesting absolute economic equality. France’s richest person, Bernard Arnault, may have accused Zucman of being a “far-left activist”, but he is not. Zucman’s argument is more democratic than socialist. His point is straightforward. Democracy demands that citizens are treated equally under the law. The tax avoidance practices of the ultra-rich violate that principle. Democracy needs a wealth tax How billionaires retain and expand their wealth and power is only half the story. Zucman hits his stride when he outlines what needs to be done to get them to meet their democratic responsibilities and pay their fair share. Income tax is not the answer, given billionaires’ earnings come in the form of corporate profits and assets rather than personal income. Instead, Zucman’s proposal is a “minimum tax on ultra-high net worth individuals based on their wealth”. Gabriel Zucman makes a democratic argument for taxing billionaires. Superpanton, via Wikimedia Commons Zucman is specific. He proposes a minimum annual tax of 2% on fortunes exceeding US$100 million. That is the rate needed to offset the regressive features of existing tax systems. This is not socialism; it is democracy. Zucman is not trying to send billionaires broke. He notes that on average, billionaires’ wealth grows by 6% each year. Compared to what others pay in tax, taking a third of that is entirely reasonable and still allows the billionaires to retain their status as the richest people in the world. Better still, it is a strategy that “closes the door on tax avoidance strategies, from holding companies and trusts to shell companies”. Despite their manifestos and pronouncements, the extraordinary fortunes of Musk, Zuckerberg and their peers demonstrate that the wealth generated by technological innovation does not automatically disperse throughout society. Instead, it has fuelled the rise of a new class of ultra-billionaires and, likely soon, trillionaires. For now, it is probably best not to listen to Musk’s advice that there is no need to save for retirement. For all their confidence in technology’s capacity to create abundance, the tech billionaires have proven far better at amassing fortunes than sharing them. While the tech billionaires ask us to trust in their fantastical projections of the future, Zucman offers a concrete policy proposal grounded in evidence and argument. He is one of the world’s leading economists, but his proposal is political. The real strength of his book is its democratically grounded contestation of the expansion of extreme wealth and the power it buys. If we do not address economic inequality with fair economic policies, AI will not put us on a golden highway to Musk’s promise of universal high income and penthouses for everyone. Quite the contrary. The current trajectory is towards economic injustice, plutocratic oligarchy and political unrest.