Gaines in efficiency is probably the number one thing that can’t be effectively taxed long term. Perhaps it could be possible to tax a specific process but even then the incentive to create loopholes would be immense, since the process is already porous those who can effectively avoid the tax make more money to invest back into making more loopholes. If we can’t stop such corruption when it is subsidizing less efficient industries that waste much of their surplus on their inherent inefficiencies how could we expect to stop it when it’s subsidizing more efficient industries.

Additionally the improvements in technology enables vertical integration at much lower scales and this means there is left surface area to tax, cheap raw goods go in, cheap refined goods come out. This already scales down to such an extent I DIY many personal projects with CNCs, and by leveraging services like Send-Cut-Send and PCBWay I can build all sorts of stuff that I otherwise would have spend 10x more on. Instead of having to earn more money that is taxed in order to purchase it I can build it as a hobby. Increasing the tax on the pipeline on purchased goods would just increase the proportion of projects that are more economical for me to make. My hobby would make money if I sold the items, but since they’re for personal use this does not get taxed.

Something unusual about the AI revolution is that the increase in productivity does not appear to be mirrored by an increase in consumption. More of what people consume is entirely digital, many people spend their lives scrolling TikTok and they do appear to be satiated. Sure there is a data center boom but I think that’s more of a mania and is going to end up over built.

The computer and internet revolutions are still slowly propagating throughout the world, there are still many technological gains to be made here and I think one of the limiters to adoption is the lack of available tech talent in the long tail. AI is different as it requires far less tech talent to use and additionally makes it easier to take advantage of the computer and internet revolutions. Not only can it propagate without the same limiting factors but it facilitates the propagation of the other revolutions at the same time.