What will replace payroll tax?

I am not the most bullish person out there on AI. However, it seems like it will displace a meaningful number of jobs. For instance, entry level software engineering, seem to already be meaningfully affected. If tech CEOs are correct and the agentic future is coming I think there is a lot of work that needs to be done to consider how we will restructure society. In this post I want to touch on a potential upcoming problem and possible solution.

Income tax currently makes up roughly half of the federal government’s revenue. One key difference between an AI agent and a human worker is the that AI agents don’t pay income tax. Suppose 10% of the work force is laid off due to generative AI. This will create an enormous double whammy for our social safety net. Many more people will be reliant on our social safety net, and simultaneously fewer people will be there to pay for it.

As a strong supporter of a well funded social safety net, I think we should be proactive to prevent this. One method I have been considering is an industrial electricity usage tax. The idea of this tax would be to charge companies for the electricity they use. I would be particularly interested in creating a tax structure that would increase during peak hours and decrease during off hours, to provide more stability for our grid and incentivize the construction of clean energy. Ideally this would tamp down on bitcoin mining as well, which uses energy, driving up prices for consumers but doesn’t provide any real value for the economy.

This may not be the best structure to tax AI. I am not an expert on the topic. However, it is a potential structure. I believe in general we are too slow to make plans for potential futures. We should be forward thinking when we approach issues like the impact of AI on the workforce and try to start preparing for the problems of tomorrow. Hopefully if AI continues to improve as its proponents suggest we will find the right structure to guarantee our continued prosperity.