By P Gosselin
German socialists keep thinking up creative ways to drive companies out and run the economy into the ground.
Online German BlackoutNews here reports on details of a proposal by the SPD Socialists Party parliamentary group (SPD-Bundestagsfraktion) to tax productivity gains resulting from the deployment of Artificial Intelligence (AI) to fund bleeding social programs.
Image by NTZ using Grok AI
The extreme left SPD socialists aim to secure new revenue streams (such as a potential “AI dividend”) for the welfare state to offset anticipated losses in payroll taxes and social security contributions if AI replaces human labor.
Although no specific tax rate has been set yet, the plan targets the extra revenue generated through automation, digitalization, and increased process efficiency.
How incompetent can policymaking get?
The initiative creates a conflict with Chancellor Friedrich Merz’s economic strategy, which claims to prioritize boosting competitiveness, encouraging investments, and accelerating productivity before discussing redistribution (“growth first, then redistribution”).
German corporate tax rates remain high internationally (at around 30.13% for corporations in 2025). While the federal government aims to reduce corporate burdens to attract investment, the proposed tax works in the opposite direction.
5 reasons it’s a bad idea
Opponents and economic critics argue that taxing AI-driven productivity gains presents several major drawbacks:
1. Implementing a tax specifically on productivity gains penalizes companies for improving efficiency. Businesses bear all upfront financial risks—purchasing AI infrastructure, data pipelines, computing power, and retraining staff—with no government support if the initiative fails. Taxing the returns when projects succeed distorts the risk-to-reward ratio.
2. Capital and tech investments are highly mobile. In a globalized market, companies choose locations based on energy costs, tax burdens, and overall return on investment. Given Germany’s existing high tax environment, introducing an extra levy on technological adoption could push domestic companies to relocate AI R&D or deter foreign investment altogether.
3. Taxing productivity gains before they materialize prioritizes revenue distribution over economic growth. By dampening the incentive to automate, the policy risks slowing total output—which ultimately limits the future tax base for standard corporate profits, wages, and consumption.
4. From a practical standpoint, defining and measuring “productivity gains purely derived from AI” is extremely difficult, How do we know if the productivity gains arise from AI or from better management, standard software updates, market shifts, or hardware upgrades creates immense administrative complexity?
Moreover, compliance costs for tracking AI-specific gains could burden small and medium enterprises (SMEs) far more than large corporations.
5. Many developed economies facing demographic shifts rely on AI and automation to maintain economic output despite a shrinking labor force. Taxing AI adoption disincentivizes technology that resolves labor shortages, risking structural stagnation.
