AI and the Future of Taxation Rethinking Government Revenue When Machines Replace Workers

Abstract

This article explores a question at the core of any modern economy that doesn't often get much attention until it is a crisis. Who will pay taxes and how will governments pay for services that societies rely on if AI takes over millions of jobs. For most of modern history labour has contributed about two thirds of national income and governments have based their revenue systems on that, by taxing income, payrolls and social security contributions. AI is poised to lead to a decline in the incomes of workers and an increase for the owners of capital, thus reducing the source of public revenues. The article illustrates the worker tax arrangements in India, the USA, Europe, Middle East and South Asia. It then examines three policy options being discussed by economists increased consumption taxes, direct taxes on capital and wide-spread public ownership via sovereign wealth funds and index investing. It offers policymakers, companies and individuals practical frameworks, real case studies and implementation strategies. The main theme is that there is no one tax that will address the issue. Rather, what is required are societies with a hybrid approach that will tax profits, consumption, and automation and distribute the ownership of AI resources more broadly. It's not all about money. It's a prosperity that's shared.