The impending AI-driven jobless economy: Who will pay taxes?

Our socioeconomic system is facing an existential threat from AI. In our capitalist society, most people depend on jobs to sustain themselves. The U.S. government, in turn, relies heavily on taxing the income of individual workers for revenue.

As artificial intelligence progressively eliminates job opportunities, a growing number of individuals will face severe job insecurity, leading to a corresponding decline in federal revenue. Radical action is needed now to steer away from a dystopian collapse toward better possibilities. 

Specifically, income-based taxes must be replaced with some other form of taxation, and the support mechanisms for the unemployed must be adapted to support a large population that will have been pushed out of the job market. Given that the use of AI in place of human workers is the cause of the problem, it makes sense that the commercial use of AI systems should be taxed to compensate Americans for lost wages and the federal government for the loss of income-based taxes. 

The motivation for these concerns is that AI capabilities are advancing rapidly, and while most jobs are currently safe, it is becoming clear that AI will eventually perform nearly any task more efficiently and cheaply than people can. From manufacturing to customer service and even creative fields like writing or music, machines are already showing that they can outperform humans. 

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The wide range of robots under development will extend AI’s reach to include physical jobs, such as construction, healthcare and house cleaning. Although this transition won’t occur overnight, it is inevitable. Companies will continue replacing human workers with AI-driven systems because it saves money and boosts productivity. The question isn’t if AI will take over most jobs, it’s when.

A future where robots do all the work could be great if we plan now for the societal implications of widespread unemployment. The obvious problem is that without jobs, people will have no way to pay for food, housing or anything else. The slightly less obvious problem is that the revenue collected by the U.S. government is currently based on taxing working humans. 

Adding up payroll, income, Social Security and Medicare taxes together accounts for more than 80% of federal revenue. As unemployment grows, the tax base will diminish, resulting in a substantial decline in government revenue. Our economy will face a double whammy of falling revenue while at the same time growing numbers of people who genuinely and through no fault of their own need support.

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Traditionally, the issue of supporting non-workers, for example, through Welfare or Universal Basic Income (UBI), has been objectionable to many because it fundamentally involves taxing the production of workers to support those who don’t work. That type of wealth reallocation evokes alienating comparisons to socialism or communism. Even if we were willing to accept the idea of taxing workers and using the money to support others, that requires a large pool of workers to tax, which we won’t have because AI will have taken their jobs. 

However, with AI replacing human workers, we have an alternative method for funding support mechanisms like UBI. What we need to do is figure out a reasonable way to tax the work done by AI and distribute the proceeds rationally to human beings.

This proposal is very different from socialism or communism in that we aren’t taking the fruits of one person’s work and giving them to someone else. Instead, we would be taking the proceeds of AI/robot effort and sharing them out to humans.

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Given that AI systems have been trained on vast amounts of the public’s data, there is even a compelling economic justification for taxing these AI systems and sending money back to the public. Think of it as a license fee paid to American citizens for using their data. 

Of course, many Americans also object to taxing businesses. From Amazon to mom-and-pop groceries, the concern is that taxes would be burdensome and harmful to the business. 

However, these companies will see huge savings from replacing workers that might cost $30K to $300K per year in salary with robots that could easily cost less than $30K and have annual maintenance and power costs well under $20K per year. The savings for non-physical jobs will be even larger as those won’t require a physical robot, just an AI running in the cloud. 

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As an added bonus, these AI workers operate 24/7 without needing rest. (Note that the power bill would not be prohibitively expensive. Training a large AI can be costly, but once trained it can be replicated many times with each copy able to run on a high-end personal computer using less than $10 of electricity per day.)

When an AI-driven robot makes something, a sandwich or a car, it creates new value: the difference between the raw materials and the final product. Similar value is also created if the robot mines gold or harvests lumber. If a human did the work, then that value would be split three ways: employer, human employee, government. However, when a robot does the work, there is no human employee in the split. 

In essence, I’m suggesting that we find a way to put humans back into that equation. The way that seems most obvious to me is that the AI work should be taxed and the proceeds used to support American citizens through UBI, or something similar. 

Admittedly, it’s unclear how we should actually measure “AI work” in a reasonable way, but even if that were a fatal flaw in this proposal, the motivating problem of AI taking over most jobs is still looming ahead. Whether it’s taxing AI work or something else, we need to come up with some plan and start implementing it now. 

We could have a bright future where people could live their lives comfortably, focused on their own passions instead of working for others. Or, if you want to see the alternative, go watch The Hunger Games.

JAMES O’BRIEN

Disclaimer: Any opinions expressed in this article are only those of the author as a private individual. Nothing in this article should be interpreted as a statement made in relation to the author’s professional position with any institution.