AI and Its Role in Tax Policy—A Vexing Matter for Policymakers - Tax Policy Center
With payroll taxes (FICA taxes) alone accounting for 92% of Social Security’s nearly $1.5 trillion revenue stream last year, and the income taxes on benefits providing another 4%, policymakers grappling with the future of this massive senior support program are keeping a watchful eye on the future workforce. And the direction and pace of artificial intelligence (AI) development is one of the future workforce attributes that presents a substantial degree of uncertainty as various revenue enhancements and cost reduction measures take center stage in the 120th Congress.
The questions are substantial: How will the workforce tax base be affected as AI takes shape? To what degree will segments of the current workforce be displaced? How will the disruptors compensate for the potential loss of Social Security revenue? What form of taxation will emerge to offset any revenue loss? Will there actually be a revenue loss? If the basic dilemma of what to do to avoid insolvency in less than six years wasn’t complex enough, the complications of AI certainly add a new dimension.
In a post yesterday on its website, the Tax Policy Center of the Urban Institute and Brookings Institution provide an assessment of the AI matter in their “Taxing Artificial Intelligence” brief. Their study discusses five leading proposals for approaching the “how to tax AI” issue, “illustrating what would be taxed, when revenue would be received, how easily the tax could be collected, and what compromise, or tradeoff, might be required.”
The Tax Policy Center brief also outlines the potential policy conflicts that could arise as AI taxation measures are considered, and suggests broader alternate measures that could be considered. Read the full brief here and a one-page summary of the content here.
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