Mr Bill Gates on Ex'tax

10 Jun 2014

As part of a Q&A session at the American Enterprise Institute, Mr Bill Gates explained he is strongly in favour of taxing consumption rather than labour:

 "I do think tax structures will have to move away from taxing payroll, because society has a desire to have employment. ... Economists would have said a progressive consumption tax is a better construct at any point in history. But what I am saying is that it’s even more important as we go forward". 

https://www.youtube.com/watch?v=qYS9lOpNWTo (about 46 minutes in)

 
 

Transcript:

Bill Gates: "I do thinks tax structures will have to move away from taxing payroll, because society has a desire to have employment. Of all the inputs: wood, coal, plastics, cement; there is one that plays a special purpose, which is labour. The fact that we have been able to tax labour as opposed to capital or consumption, shows that the advance to labour was good relative to other things. Technology in general will make capital more attractive than labor over time. Software substitution — whether it’s for drivers or waiters, nurses … it’s progressing. And that’s going to force us to rethink how these tax structures work in order to maximize employment, given that capitalism in general over time will create more inequality, and technology over time will reduce demand for jobs, particularly at the lower end of the skill set. We have to adjust, and these things are coming fast. Twenty years from now, labor demand for lots of skill sets will be substantially lower, and I don’t think people have that in their mental model."

Host: "So aligning the incentives in our economy to move away from taxing labor and moving to something like a progressive consumption tax is just a smart thing to do to have an economy that is better aligned."  

Bill Gates: "Economists would have said a progressive consumption tax is a better construct at any point in history. But what I am saying is that it’s even more important as we go forward because I want to distort in the favor of labor.(…) Looking at consumption instead of income. Consumption really is what you care about. (...) And the idea that consumption should be progressively taxed, I think that makes a lot of sense."