Can we tax the robots?
For over a century, public finance has rested on a straightforward social contract: individuals work, earn income, and contribute taxes, and in return, governments provide social protection and public goods.
That balance is now shifting. The rapid rise of LLMs and AI tools is challenging the foundations of this arrangement, disrupting how income is generated. In turn, this is shifting how governments raise revenue.
This will have major effects on government finances and the way the wider economy works. Without a tax system that reflects the impact of automation, the consequences could be significant. Labor incomes may decline sharply, demand for public spending may rise, and government revenues could come under growing strain.
With rapid change on the horizon, discourse around potential solutions is increasing. A paper by RAND Corporation cautioned that “As capabilities improve and AI is diffused, we need approaches to help maintain economic opportunity, social cohesion,...
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