The U.S. Government collected $2.6 trillion in individual income taxes in 2025, representing more than half of its total revenue, but a growing chorus of voices is questioning whether that model is sustainable in an era of rapid artificial intelligence development. Former presidential candidate Andrew Yang ignited the debate this week, calling for a shift away from taxing labor and toward taxing AI itself.
Speaking on CNBC’s Squawk Box, Yang argued that taxation should discourage undesirable behaviors, and that penalizing employment is counterproductive as AI threatens jobs. “We’re going to be in a position where we want to shore up labor in every quarter, in every organization and environment,” he said. “We should actually try to stop taxing labor, and instead, start taxing AI.”
Yang’s proposal isn’t isolated. Senator Cory Booker (D-NJ) recently introduced legislation to eliminate income tax on the first $75,000 of earnings, and Vinod Khosla, founder of Khosla Ventures, has advocated for eliminating income tax for those earning less than $100,000. However, according to the Bipartisan Policy Center, individuals making $100,000 or less contributed only about 15% of total income tax revenue last year.
The urgency behind these proposals stems from predictions of widespread job displacement due to AI. Anthropic CEO Dario Amodei has suggested AI could drive unemployment as high as 20%, although Mustafa Suleyman, Microsoft’s AI chief, believes most white-collar work could be automated within 18 months. Yang echoed these concerns, citing observations from a recent AI conference. “They said to me that what we’re going to see in the next six months outstrips what we’ve seen in the last ten years, as the rate of change is on a hockey stick and heading up,” he stated.
Recent labor market data shows early signs of strain, with unemployment ticking up to 4.4% last month and employers reporting 91,000 job losses. Several tech companies, including Block and Atlassian, have attributed recent layoffs to increased efficiency driven by AI. OpenAI’s Sam Altman has cautioned against companies falsely attributing job cuts to AI, a practice he termed “AI washing.”
While Yang proposes taxing AI directly, others believe the focus should be on the tasks robots perform. Zak Kidd, founder of AI-powered tech firm AskHumans, is pitching a “tax the task” model to governors across the country. This model would levy a fee on businesses for each activity performed by a humanoid robot that replaces a human worker, effectively replacing lost tax revenue. Kidd illustrated the concept with the example of a hotel replacing a $28-per-hour housekeeper with a $2-per-hour robot, arguing that even with a tax, the overall cost would still be lower for the business.
Kidd believes taxing AI itself is impractical due to the increasing integration of AI into various workflows, making it difficult to delineate where AI ends and human interpretation begins. He views AI as augmenting knowledge work, while robotics poses a more direct threat to manual labor. “I see AI as an augmentation of knowledge work,” he said. “But I see robotics, humanoid robotics as a replacement for manual work.”
As of Friday, March 13, 2026, no federal legislation has been proposed to implement either Yang’s or Kidd’s proposals. The Treasury Department has not issued a statement regarding the potential for shifting tax burdens from labor to AI or robotic tasks.
