Should AI pay taxes? The debate is gaining traction in the US

As the controversy over AI safety grows, another debate is emerging. Bill Gates, the founder of Microsoft, has said that artificial intelligence should pay taxes to compensate for the jobs that will be destroyed by the deployment of this technology.

“Let’s say workers pay, on a pay-as-you-go basis, into the pension Social Security fund. So active workers are supporting retired workers. If you’ve let go of a worker and hired a robot to do that job, why are you so incentivizing the trade-off against the human labor that you don’t ask the robot to also pay into the pension fund?” the tech guru said last week in an interview with Ezra Klein in The New York Times.

“Is it that the pro-robot union has gotten the tax laws to say: No, if you’re not flesh, then let pensions go bankrupt? Which they’re on a path to do even without robot replacement,” he added, along with other warnings about the risks of uncontrolled development of the new AI models.

The debate Gates refers to—the taxation of AI-related activities—has been on the table for some time, but it is intensifying in the United States. In recent months progressive lawmakers have introduced half a dozen proposals to reduce tax benefits for AI labs or to create a direct tax on their activity. The proposals have made little headway so far because Democrats do not control either chamber of Congress, but with midterm elections around the corner, the balance of power could change.

Gates’s remarks came the same week that U.S. President Donald Trump gathered leading AI company executives at the White House to propose renaming the field “superintelligence” and to say he would not place limits on the development of the new technologies. The Republican president backs self-regulation in a fiercely competitive sector.

Meanwhile, initiatives to tax AI are piling up. They range from levies on data centers—their water or electricity consumption, computing hours, robots (automation that replaces work)—to taxes on tokens or AI usage (images created or number of words used), on the extraordinary profits of these companies or on their capital.

A few weeks ago three Democratic representatives—Greg Casar (Texas), Valerie Foushee (North Carolina) and Sara Jacobs (California)—introduced a proposal to tax artificial intelligence companies and use the proceeds to fund an employment program to offset AI’s impact on the labor market. The plan arrived amid growing pressure in Washington to raise taxes on the activity.

Senator Bernie Sanders, a leading figure of the U.S. left, has also put forward the creation of a special tax on AI companies to be paid in shares rather than cash, until the state accumulates 50% of these companies’ capital in a sovereign wealth fund to capture the wealth that’s generated. The levy would apply to any company with at least $200 million in annual gross revenues from AI-related activities.

Sanders said this would allow the government to control the decisions of tech labs. ““It gives the American people the ability to prevent AI developments that will negatively impact their lives,” he said.

Senator Elizabeth Warren of Massachusetts, another prominent progressive voice, is calling for tax law reform to tax AI companies on the grounds that they should benefit all Americans.

Warren proposes a direct tax on AI companies, including data centers, and taxing companies for negative externalities such as water and energy consumption. “A well-designed tax would focus on companies that can afford it and scale with the impact of AI: the larger the data center, the more they would pay,” she said.

Warren last week sent several letters to the executives of Meta, Amazon, Alphabet and Microsoft—owners of some of the most powerful AI labs—demanding transparency about tax incentives granted by the Trump administration for the development of the new technology and the construction of data centers.

“Americans across the country are worried about the impacts of artificial intelligence (AI) on their lives — from increased utility bills to threats of job losses and cyberattacks,” Warren wrote, signing alongside about half a dozen other Democratic officials. “Rather than regulate AI to protect American families or address the nation’s affordability crisis, the Trump administration and its Republican allies in Congress have prioritized handing out colossal tax breaks to giant corporations.”

Senator Mark Kelly of Arizona has also recently published another legislative proposal to ease AI’s impact on the labor market. His plan includes three new taxes: one on digital advertising revenue, another on AI use in generated data and a third on the windfall profits of AI companies. The revenue would be allocated to a fund to mitigate the technology’s impact on the labor market.

Academic initiatives

Alongside political initiatives, academic proposals are also abundant. “Whether the goal is to protect workers or improve the fiscal outlook, shoring up the taxation of capital income, where much of AI’s gains are likely to accrue, would likely be more effective than a new tax that singles out AI,” Tracy Gordon and Elena Spatoulas write in a recent article published by the Tax Policy Center, a bipartisan think tank.

Anton Korinek, a researcher at the Brookings Institution, published a study this year analyzing options to tax the new model creators of chatbots. “Common proposals range from taxing robots and computing power to levying fees on AI-generated tokens and digital services,” he wrote. “Yet without a coherent framework for evaluating these options, we risk implementing policies that could hinder innovation and undermine competitiveness while failing to address the fundamental fiscal challenges ahead.”

Korinek explains that two-thirds of tax revenues come from labor income, and AI is expected to erode that source because it will reduce labor in many occupations. He proposes shifting the tax burden toward consumption with taxes on the digital services AI provides to consumers, symbolic levies on AI-generated content, or taxes on robotic services such as robotic delivery or customer service.

“AI is increasingly dominating policy discussions in Washington, and it has the potential to be the most disruptive technological and economic change in decades,”write Aaron Till and Shai Akabas, researchers at the Bipartisan Policy Center, a Washington think tank.

These experts say there is no single option to tax the sector. Options could include company-specific taxes, taxes on AI use or adoption, taxes on AI inputs or broader reforms of the U.S. tax code that do not reference AI at all, they explain. They note that state and local governments are already passing measures, from Chicago’s tax on cloud computing services to Virginia’s levy on data centers’ electricity consumption, as well as subsidies that dozens of states offer to attract data centers.

But Till and Akabas call for measured reflection by authorities before acting, because many of the effects AI will have on the labor market, equity and efficiency are still unknown. Therefore they urge clearly defining tax concepts, such as what constitutes an AI company or what an AI product is. “Future lawmakers and administrations should weigh the tradeoffs carefully and begin laying the groundwork for these decisions,” they warn.

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