The Next 100 Years of Taxes

There’s a lot of discussion at the moment about new forms of taxation, whether taxation should serve as an economic or a social tool, and what the future of taxes will look like. Here’s my prediction for the next 100 years, and what I think should happen to revolutionise taxation.

The first question humanity will have to answer is this: do we want taxation to boost the economy to make us all richer, or create a more level playing field? Well, I say “have to” — we’ll probably just spend the next 100 years bickering about it instead of actually deciding. However, this will be the underlying focus of the debate of future years.

Taxation, broadly speaking, is used currently to boost economies. The largest and most influential countries aren’t anything close to socialist: there is an element of redistribution, but taxation is relatively low and economics are the priority of most governments.

However, the current method of redistribution through taxation is not NIT or UBI. It is simply taking more money through taxation, and using this to fund better public services and schemes to create a level playing field and equality of opportunity.

That won’t be the case in the future, not least because of how unhelpful this model is economically. Socialism in its true form doesn’t really work over any long period. The future of taxation, however, could be in the form of a social tool, whilst still maintaining an economic function.

That’s where Negative Income Tax (NIT) and Universal Basic Income (UBI) come in. The latter is certainly more popular, but I’m a strong believer in the idea that popularity doesn’t equate to functionality. I personally prefer NIT, and think that it is the most likely future of taxation.

One of the reasons for this is that NIT isn’t dissimilar to current taxation systems. Currently, the preferred model is a personal allowance, which every individual is allowed (as long as they actually earn it!) tax-free, and on top of that is progressive taxation rates, where the more you earn, the greater percentage you pay.

NIT is slightly different — but only slightly. It simply adds in the concept that, if one earns less than the personal allowance, one receives a proportion of their shortfall back from the government. However, the personal allowance would likely be a lot higher than it is today (for example, it is currently £10875 in the UK) in order to ensure that it is an income on which one can survive.

The reason for that is that the welfare state would largely be abolished and dismantled after the introduction of NIT. People with disabilities would be largely protected by healthcare systems which provide for their conditions free of charge (single-payer and Bismarck models of healthcare, for example), and so it is hoped that NIT could be the only government handout, paid for by the taxes of those who earn above the threshold.

NIT is egalitarian, broadly, but affordable and more compatible with economic growth than UBI, which is where the state simply gives everyone a sum of money, regardless of income. It's actually a lot fairer too, and so my preferred system. The reason why I think it will become the preferred system of governments is feasibility, along with simplicity.

Some may still be sceptical, though, of why any change is needed or even viable. We will need change due to AI: more and more tasks which humans do are being taken over by technology, and, although we’ve managed to innovate in the past, there’s good reason to believe that we have a limit we’re getting incredibly close to.

If, therefore, many people will find themselves out of work, people are going to need money given to them by the state. However, the state will be able to do this, although it sounds slightly unfeasible now, because the AI boom will likely create huge room for growth in the economy.

1000 years ago, almost everyone worked because they had to. Now, countries can generally support 5 or 10 percent of their population without employment, due to economic growth. We may have the capacity for a quarter or even a half in the future. That’s why I believe that the future of taxation is Negative Income Tax, and that the current model cannot be sustained.