Modelling Tax Base Distortions from AI-Induced Automation in US Economy

This paper investigates the potential impacts of Artificial Intelligence (AI)-driven automation on the United States tax system. As AI transforms industries, it could significantly shift the balance between labor and capital income, potentially eroding traditional tax bases. We build on existing research findings and describe the limitations of the current tax regime to capture profits from automation. Utilizing a Computable General Equilibrium (CGE) model, we simulate various automation scenarios to study how AI could undermine labor-based government revenue models. Ultimately, this research aims to understand how widespread automation could affect the tax bases under the current taxation system and provide preliminary estimates of such tax distortions.