In his August 26, 2026 essay - The turbulent AI era is here. The choices we make now are critical, Bill Gates raises a lot of important ideas. He also suggests a tax on AI tokens and robots. Even before AI, he suggested (2017) taxing robots (see Mann (June 2019) and WEF (2017)). The rationale for a robot tax is to replace income taxes not generated when the robot is replacing work of a human with wage or self-employment income that generates payroll and income taxes. He also notes that today, the business purchasing the robot gets to immediately expense it (100% bonus depreciation) whereas the business needs to pay payroll taxes on wages paid to workers.
I think the rational for taxing AI tokens is to address the costs of negative externalities that exist with them such as the costs of data centers and electricity, as well as AI reducing the amount of human labor and wages needed.
The concerns raised in the digital and AI era are not unusual compared to new practices and technologies that emerged in the past. I can recall that many tax pros were concerned that continued advances in tax prep software, few entry level tax professionals would be needed. That did not turn out to be the case and any reduction really freed the worker to perhaps engage in greater valued activities for clients such as helping them grow their business.
During an October 31, 1963 news conference, President Kennedy was asked about concerns with the "thousands of jobs" lost weekly due to automation. He replied: "So automation does not need to be, we hope, our enemy." He noted that education systems need to keep up in preparing people for a new era that also makes life easier. He said machines "can provide new jobs, but I think it is going to take a good deal of wisdom by those of us in the Governments, as well as labor and management." [JFK Library archive]
With the emergence of e-commerce and more digital activities in the 1990s, the United Nations issued a report in 1999 that suggested taxing bits and patents to generate funds to help narrow the digital divide. A bit tax would apply to data transfers including email and was also referred to an email tax. The report also notes the cost savings of sending document via email for under 20 cents compared to $75 for a courier or $45 for a fax. It didn't focus on the job loss related to this change, perhaps because there was new work to do in the new digital era. [UN, Human Development Report 1999]
Some considerations:
- Would a low tax on robots help the economy if used to reduce the $40 trillion national debt and its annual interest expense of $1 trillion? Issues of course, what is a robot? Also, why tax something receiving favorable income tax treatment (expensing)? The two approaches are incompatible.
- What about a robot and/or AI tax to help address a new digital divide of those who can use AI tools very well and those who do not have the time to learn due to work and family commitments and cost.
- I think at some point, more AI tokens will cost something due to costs incurred by the AI providers. That should generate some income tax and reduce negative externalities such as lots of energy usage because when it costs money to use AI tools, less AI will be used and likely it will mainly be used for more important activities than sorting out one's travel plans or looking up answers to tax questions to share with your tax adviser.
- Are wealth tax proposals such as the Prop 40 billionaire tax in California a type of AI tax given that the wealth of some of those subject to this proposed tax was generated from AI and digital activities? I don't think this justifies a wealth tax and certainly not all wealth is from digital and AI applications, but the connection between a lot of the wealth and AI/digital activities is strong.
No comments:
Post a Comment