The Case for Taxing AI to Address Economic Inequality

(SeaPRwire) –   In an economy that channels wealth to the ultra-wealthy and leaves mere scraps for the working class, Americans are barely holding on. AI threatens to intensify this divide: tech executives have cautioned that AI could result in “a level of wealth concentration that will break society” and establish a “permanent underclass.”

I reject that future. Constructing an economy that benefits everyone will demand multiple policy approaches. However, it begins with the admission: the time has come to tax AI and invest in our citizens.

AI offers immense potential. Yet, Americans are justifiably worried that AI could further distort our economy. This technology is minting numerous tech billionaires, while firms are dismissing employees under the guise of AI. Simultaneously, AI data centers are driving up utility costs; for households residing near massive data centers, electricity prices have surged by as much as 267% over the last five years. It is no shock that Americans are attending town halls to demonstrate against data centers and that communities nationwide are seeking moratoriums on data center construction.

Big Tech CEOs claim this is merely the start, forecasting that AI will soon automate the majority of white-collar roles. While some of this might be exaggeration, it is undeniable that AI is already reshaping the labor market. Since healthcare is frequently linked to employment, an AI surge could cost a family more than just their income. Even those who retain their positions and insurance could suffer; experts caution that the excitement surrounding AI is stoking a financial bubble that endangers another economic collapse.

Lawmakers certainly need to regulate AI and guard against its most severe dangers, such as cyberattacks that could compromise our financial infrastructure and national security. We must also address the issue of AI’s escalating energy consumption and guarantee that household utility bills do not soar. Additionally, we need increased oversight of the opaque realm of private credit that funds a significant portion of AI transactions to prevent them from destabilizing our economy.

However, any reaction to an impending AI disaster must also address our biased tax system.

Taxing AI is a method to ensure that the profits from AI advantage all Americans, rather than funneling them solely to the affluent minority. If millions lose their employment to AI, we will require the resources to provide universal healthcare so these workers are not ruined by medical expenses. If AI alters the future of labor, we will need to fund free education, apprenticeships, and a federal jobs guarantee to ensure all Americans have well-compensated employment. And as workers recover, we will need the income to strengthen unemployment insurance to support households. The sole path to achieving this is by reforming our tax code.

We can begin by ensuring corporations contribute their fair portion. Currently, businesses pay payroll taxes for their staff but receive tax deductions for technology investments—essentially, a tax surcharge for employing humans and a tax incentive for purchasing machinery. In an AI-driven landscape, this implies our tax code encourages corporations to terminate staff and substitute them with AI. This is incorrect. We must equalize the competitive environment by increasing taxes on corporations and capital gains and shutting corporate tax loopholes. One approach to closing these loopholes? Fortify the minimum tax for billion-dollar corporations, legislation I helped enact.

However, there is additional work to be done. Some of the richest people in America pay lower tax rates than a public school teacher in Boston because our system levies taxes on income but not on wealth. AI billionaires are employing the same strategy: accumulating wealth through enormous stock valuations and evading the taxes that would be due if that money were earned as a salary. If it was not evident previously, there is no doubt in an AI-dominated world: we require a wealth tax. Jeff Bezos and Sam Altman should not pay lower tax rates than the employees they dismiss.

Reimagining our tax code must also involve targeting the source: this entails taxing AI firms directly, beginning with AI data centers. Most AI data centers are managed or run by trillion-dollar entities. By levying a sensible excise tax on the energy consumed by data centers, families could recover some of AI’s benefits, while the U.S. remains a contender in the global AI competition. A properly structured tax would target corporations that can bear the cost and scale with AI’s influence: the larger the data center, the higher the tax.

We must not hesitate to explore even larger and more audacious plans to tax AI, including concepts that seem extreme now but may soon become mainstream. Because what is evident to me is this: if we reform our tax code and tax AI, we can utilize those funds to construct a nation that functions for every individual. A nation where healthcare is viewed as a fundamental right, where every American is assured a decent job, and where education is not a luxury reserved for the rich. That is the potential I see in taxing AI.

AI was developed using human ingenuity and intellect, partially financed by federal investments in scientific research, and operates via data centers situated on American soil utilizing our communal power grid. The American public merits a portion of this technology’s success. And I am prepared to collaborate with anyone to accomplish this.