Comment by Elena Patel

The worry driving the debate over taxing AI is real. AI may displace workers on a large scale as well as the labor income on which our existing tax system relies. But the danger of the national debt—a financial hole that an AI tax cannot fill—is already here. Rising interest costs consume a growing share of the federal budget. That leaves less for everything else the government does, or can do—like respond to the next recession, pandemic, or the very wave of displacement that AI taxes are meant to address. Lawmakers can prepare for both dangers. AI’s gains are likely to keep flowing disproportionately to capital, income that’s already taxed more lightly than labor. Closing that gap would likely do more for the fiscal outlook than a narrow tax on AI and help fund responses to its costs.