If AI Replaces Workers, Should It Also Pay Taxes?
By Laura Delle Femmine, Madrid – November 30, 2025
Artificial intelligence (AI) is rapidly transforming the global economy, attracting massive investments from technology giants while simultaneously triggering waves of workforce reductions. Companies like Amazon, Meta, and UPS are leading the charge, pouring billions into AI development even as they reduce their human workforce. This growing trend has intensified a crucial debate: If machines and AI systems replace human workers, should they also bear the tax burden that humans leave behind?
The Automation-Taxation Dilemma
Labor income—through income tax and social security contributions—has traditionally been a cornerstone of public revenues worldwide. However, as AI and automation reduce the number of human employees, governments face the prospect of declining tax income. This raises pressing questions about the sustainability of tax systems and social benefits.
The notion of taxing robots and AI is not new. In 2019, Nobel laureate Edmund Phelps suggested imposing a "robot tax" to support social welfare programs. Around the same time, Microsoft founder Bill Gates proposed taxing robots at the same level as the human workers they replace. These ideas aim to counterbalance the potential loss in tax revenues as machines take on more work.
Expert Perspectives on AI Taxation
Experts are divided on how best to address these challenges. Sanjay Patnaik, director of the Center for Regulation and Markets at the Brookings Institution, points out that in countries like the United States, around 85% of federal tax revenue comes from labor income, which could be severely impacted by automation. He suggests that raising taxes on capital gains might be a more effective solution than creating a specific AI tax, which could be difficult to implement and might disrupt markets.
Daniel Waldenström of the Stockholm Institute for Industrial Economics echoes this skepticism. He argues that defining what exactly constitutes AI or automation for taxation purposes is problematic—should it be software, a robot, or an automated process? Waldenström recommends continuing to tax existing categories—labor, consumption, and capital—rather than introducing new AI-specific levies.
Similarly, the International Monetary Fund (IMF) advises against taxing AI directly, warning that such measures could hinder productivity and distort markets. Instead, the IMF calls for vigilance and adaptive tax policies, including increasing capital taxes, creating special levies on “excessive” corporate profits, and reevaluating tax incentives for patents and innovation that may displace workers.
Carl Frey, an associate professor at Oxford University specializing in AI and work, agrees that an AI-specific tax is not the answer but highlights a systemic tax imbalance. In many OECD countries, capital has become progressively undertaxed compared to labor, incentivizing investments in automation over human labor. Frey advocates balancing tax burdens to encourage job creation alongside technological advancement.
Mixed Economic Forecasts and Uncertain Impact
While the disruptive potential of AI is clear, its ultimate impact on jobs and economic growth remains uncertain. Goldman Sachs forecasts that AI could raise global GDP by 7% over the next decade, and the IMF expects up to 0.8 percentage points of annual growth through 2030. Conversely, the International Labour Organization estimates that about one in four workers worldwide face some exposure to AI in their jobs but maintains that most jobs will evolve rather than vanish outright.
Luz Rodríguez, a labor law professor and former Spanish Secretary of State for Employment, notes that whereas past automation waves affected middle-skill production jobs, generative AI targets higher-level roles demanding critical thinking. She remains cautiously optimistic, highlighting new jobs in emerging fields like content moderation and Bitcoin mining that arise from technological progress.
Industry Positions and Broader Concerns
Industry voices caution against new AI taxes. Susanne Bieller, secretary general of the International Federation of Robotics, argues that automation creates jobs by increasing productivity and that taxing production tools rather than profits could hurt competitiveness and employment. She emphasizes the need for incentives that help companies adopt technologies like robots and digitalization to keep pace internationally. Bieller notes the global labor shortage—estimated at 40 million jobs annually—as a challenge that robots can help address by handling specific tasks rather than entire jobs.
Meanwhile, concerns are growing about inequality, corporate profit surges, and the environmental footprint of AI technologies. The soaring investments and stock valuations of tech giants raise questions about market bubbles. Likewise, AI’s substantial energy consumption might negate some of the promised economic and productivity gains in terms of climate impact.
The Road Ahead
As AI continues to reshape the labor market and tax bases, policymakers face complex choices. The best-case scenario envisions new, more productive, and better-paid jobs arising to offset losses, helping maintain social stability. However, risks persist that adaptation may lag behind disruption, exacerbating inequalities between skill levels, sectors, and nations.
Daron Acemoğlu and Simon Johnson, economists at MIT, cautioned in 2023 that although automation has boosted productivity and corporate profits in recent decades, its benefits have not translated into broad shared prosperity in industrialized nations. Labor law experts like Luz Rodríguez stress the importance of an active political debate to shape technology’s social impacts rather than accepting automation as a deterministic force.
As the technological race accelerates, balancing innovation with fair taxation and social equity will be a defining challenge of the AI era.
For more updates and in-depth analysis on technology’s impact on society, subscribe to EL PAÍS USA Edition.
