Andrew Yang proposes replacing labor taxes with AI levies to protect human employment

In 2025, individual income taxes generated over 50% of U.S. federal revenue, totaling $2.6 trillion and serving as the primary source of government funding. However, the income tax is a relatively modern development; it was first implemented by President Abraham Lincoln during the Civil War as a 3% flat tax on earnings above $800. Just as this tax system had a beginning, it may not be permanent.

This is the vision of Andrew Yang, former presidential candidate and CEO of Noble Mobile. During an appearance on CNBC’s Squawk Box, Yang proposed that the U.S. should eliminate taxes on human labor and shift the burden to artificial intelligence. He argued that since taxation is used to discourage specific behaviors, the government should stop penalizing the employment of people at a time when human jobs are increasingly at risk.

“We need to prioritize supporting labor across every sector and organization,” Yang stated. “We should move away from taxing human work and instead begin taxing AI.”

Yang is not alone in suggesting a departure from labor-based taxation. The concept has gained traction among various political and business figures. For instance, Sen. Cory Booker (D-NJ) recently proposed legislation to remove income tax on the first $75,000 of an individual’s income. Similarly, billionaire and Khosla Ventures founder Vinod Khosla suggested in an interview with Editor-in-Chief Alyson Shontell that presidential candidates should advocate for eliminating income tax for those earning under $100,000.

Data from the Bipartisan Policy Center indicates that individuals earning $100,000 or less accounted for roughly 15% of total income tax revenue last year. Meanwhile, industry leaders warn that AI is poised to disrupt the white-collar workforce. Anthropic CEO Dario Amodei has suggested that unemployment could reach 20%, while Microsoft AI chief Mustafa Suleyman believes most white-collar roles could be automated within 18 months. Yang, drawing on his own industry insights, shares these concerns.

“I recently attended an AI conference out west, and it was staggering,” Yang remarked, reaffirming his support for shifting the tax burden to AI. “The consensus was that the progress we will witness in the next six months will exceed what we’ve seen over the last decade, as the pace of innovation is accelerating exponentially.”

Although the labor market has shown resilience, there are signs of softening, with unemployment rising to 4.4% last month and 91,000 job losses reported. Several major tech firms have cited AI as a reason for staff reductions. For example, Jack Dorsey’s Block recently cut nearly half its staff, pointing to AI-driven productivity, and Atlassian recently laid off 10% of its global workforce. However, OpenAI’s Sam Altman has cautioned that some companies may be “AI washing,” using the technology as a scapegoat for layoffs driven by other factors.

Beyond the AI era: a tax system for humanoid robots

While Yang advocates for taxing AI companies, other tech leaders argue that such a tax is impractical. Some suggest the real threat to labor is not software, but physical robots, and that the U.S. should prepare to tax the work performed by humanoid machines.

Zak Kidd, founder of the AI-powered firm AskHumans, has proposed a “task tax.” Under this model, businesses would pay a fee for every specific task performed by a humanoid robot that replaces a human worker. Kidd, whose firm has worked with organizations like The World Bank, Fidelity, and The Ned, is currently presenting this concept to state governors. The model is intended to recover tax revenue lost when companies replace human employees with automated systems.

“Our goal is to levy a tax on each of these activities, with the proceeds going to the state to bridge the fiscal gap,” Kidd explained to , referring to the future displacement of human labor by robots.

Using the example of a hotel, Kidd noted that replacing a human housekeeper earning $28 per hour with a $2-per-hour robot creates a significant tax shortfall. Even with a modest tax on the robot’s activity, the business would still see lower costs compared to employing a human.

Unlike Yang, Kidd believes taxing AI is logistically difficult because it is increasingly hard to distinguish between AI-assisted work and human input. He views AI as a tool to enhance knowledge-based roles, whereas he sees humanoid robotics as a direct substitute for manual labor.