Alap Shah warns AI could destabilize the labor market and the consumer economy if job displacement accelerates without a policy response.
In a new Bloomberg interview, the co-author of the viral Citrini AI report believes that it’s about time to update the tax code to support Americans who might get displaced as AI drives large productivity gains across corporate America.
“If we let AI replace the jobs without taxing the AI appropriately, then it can really get to the core of the consumer economy, and that’s where some of the real contagion cases can happen.
As long as we are clear-eyed about what’s happening and then take steps to make sure that we’re not trying to suggest that we should just massively increase the tax on AI companies or semiconductors or anything else, but there are going to be a clear set of winners and a clear set of losers from this scenario playing out.
Our point here is that we should be looking hard at figuring out how to tax some of those incremental gains, windfall gains really, and keep our society running and whole.”
According to Shah, the current tax code is not designed for a world dominated by AI, as most of the gains will be realized by asset holders and large corporations, leaving small businesses and everyday Americans behind.
“It will accrue in the AI complex, so the material stocks, semiconductor stocks, and foundation lab company stocks, and some tech stocks. But the other place likely that it will accrue in an even larger form is in companies that are able to cut a lot of jobs but don’t have their demand suffer as much, because their margins will also explode.
In that world, it seems a little asymmetric to have the same corporate tax rate for someone who is selling food as somebody who’s selling a semiconductor when that incremental semiconductor is costing 10 jobs and can really hit the market and the economy. I think we need to start thinking a little bit more expansively about how we structure our tax code so that we can maintain the equilibrium.”
Shah warns that preserving the existing economic system will require proactive tax policy aligned with the forces driving job losses.
“If we want to maintain the system as it stands now rather than tear it down and build a new one, then we gotta think about the tax policy that is targeted specifically at what is driving those job losses.”
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