“AI will transform economies and need a rethink of capitalism & equity,” billionaire venture capitalist Vinod Khosla wrote in an X post on Monday, suggesting that it might be wise to eliminate income taxes for the vast majority of Americans and instead focus on capital if AI eliminates millions of jobs. “The labor share of the economy will drastically decrease in comparison to capital. Should we abolish the capital gains tax’s favorable treatment and make it equivalent to regular income?
As the co-founder of Sun Microsystems and the first venture capitalist to invest in OpenAI, Khosla was arguing that the widespread replacement of labor by AI would call for higher taxation on assets like stocks and real estate.
After leaving Kleiner Perkins, the seasoned financier founded Khosla Ventures. He included a video showing some of the vocations that AI may replace, including chip designers, truck drivers, therapists, and accountants.
In a follow-up post, Khosla claimed that increasing capital taxes would bring in so much money that the government could eliminate taxes for the majority of the approximately 150 million US taxpayers.With a capital gains tax equal to ordinary income and a few other adjustments, it would be possible to remove the bottom 125 million people from the tax rolls while maintaining revenue neutrality,” he said.
A “true abuse!” he continued, tax incentives like tax-free borrowing against unrealized gains and carrying over tax losses are “special interest goodies inserted by lobbyists and campaign contributions, not true capitalism.”
Common criticisms of higher taxes, such as the fact that they may deter investment and entrepreneurship, that they can be difficult to collect, and that rich individuals may flee the nation to avoid them, were not addressed by Khosla.
As Khosla has already emphasized, the introduction of AI might necessitate significant policy adjustments. According to his late 2024 prediction, artificial intelligence (AI) may replace humans in 80% of jobs in 25 years, necessitating the creation of universal basic income to offset job losses. “UBI may become essential as AI lessens the need for human labor, with governments playing a crucial role in regulating AI’s impact and ensuring equitable wealth distribution,” he stated on the website of his company.
Khosla is not the only one who believes AI will alter society. Late last year, Elon Musk hinted that if advancements in robotics and artificial intelligence produce an abundance of resources for everyone, labor would become “optional” and money might become “irrelevant.”
Furthermore, according to the CEO of SpaceX and Tesla, retirement funds would not be required in ten or twenty years as everyone may have “whatever stuff they want.”
Skeptics like Michael Burry of “The Big Short” have warned that the AI boom is a speculative bubble, that tech companies are overspending on data centers and microchips that will soon become outdated, and that actual AI is still a ways off.
