Authors Urge 6-Part US Tax Overhaul as AI Threatens Two-Thirds of Federal Revenue
Updated
Updated · rand.org · Aug 31
Authors Urge 6-Part US Tax Overhaul as AI Threatens Two-Thirds of Federal Revenue
1 articles · Updated · rand.org · Aug 31
Summary
A new policy paper warns AI could erode the U.S. tax base by displacing 10% to 15% of labor hours over the next 10 to 15 years.
About two-thirds of federal revenue now comes from labor through payroll and income taxes, and the authors argue parts of the tax code already discourage hiring, worsening AI-driven employment risks.
The paper lays out a six-category framework to separate tax provisions that amplify labor displacement from those more resilient to it, aiming to stabilize revenue while preserving demand for human work.
Proposed reforms include cutting the business share of payroll taxes, taxing long-term capital gains at ordinary rates, adding a federal VAT, and exploring wealth, inheritance, and per-capita profit-based corporate taxes.
The authors say a broad package focused on economic outcomes rather than specific technologies offers the best chance to protect fiscal stability and employment in an AI-augmented economy.