The Case for an AI Token Tax

Speaker 1 · 0:00Today on the AI Daily Brief, the case for an AI token tax and maybe the case against it. The AI Daily Brief is a daily podcast and video about the most important news and discussions in AI. Alright, friends. Quick announcements before we dive in. First of all, thank you to today's sponsors, KPMG, robots and pencils, Assembly, and Zencoder.

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Speaker 1 · 1:00Now I am traveling today and so had to prepare this episode in advance. Luckily, though, I think this topic was some of the most interesting discourse yesterday, especially after Elizabeth Warren released an op ed in Time magazine about why AI should be taxed. But we are doing a main only type of episode. We should be back with our normal format headlines in domain shortly. Today, we're gonna talk about the argument for attacks on AI tokens.

Speaker 1 · 1:24Now to be clear, we're also gonna talk about the arguments against that, but you better believe that this is a conversation that is just going to increase. Now one of the things that I feel very strongly is that it is wildly in the interest of the AI industry to not reject out of hand these types of novel policy approaches. If we are indeed entering in such a critically and categorically different period, it follows that policies that have served well enough for many years may simply not make sense in the new That does not mean we have to ultimately be in favor of the new policies that get proposed, but I think that the healthiest stance is one of open engagement. Now when it comes to an AI token tax specifically, this is a conversation on the rise. It's been around for a while.

Speaker 1 · 2:11El Pais, for example, wrote a big piece last November called If AI Replaces Workers, Should It Also Pay Taxes, but it's getting a second wind in a major way right now. Just yesterday on Wednesday, US Senate candidate from Michigan, Mallory McMorrow, released a new policy about protecting workers in the age of AI, featuring, among other things, a token tax. Again, as tempting as it is, especially for the more libertarian minded among you, to reject out of hand any new government policy, I don't think it's particularly hard to tell when someone is coming at the conversation in good faith versus bad faith, and there are a lot of completely reasonable things in McMorrow's policy that I anticipate seeing in other people's platforms and in bills to come. Some of the policies in McMorrow's plan are a little bit more well trodden. For example, she's proposing an AI workforce reinvestment fund that requires companies that automate jobs away to contribute pooled resources to a professional apprenticeship program and what she calls a worker centered retraining and upskilling program.

Speaker 1 · 3:06However, for our purposes, the more notable one is a token tax, which she calls a modest fee on commercial companies' AI usage, ensuring that as AI scales, so do the benefits for working people. Quote, As AI use grows to billions of queries per day, a fraction of a cent charge per token becomes a meaningful, sustainable funding stream for government programs without raising taxes on a single American worker. But it wasn't just a Senate candidate talking about this this week. This is also a growing talking point from people already there in the Senate. In Time magazine on Wednesday, Elizabeth Warren published an op ed called Why We Need Tax AI.

Speaker 1 · 3:39Again, a lot of it is pretty well trodden territory: critiques of AI data centers for jacking up utility bills, concern around an AI financial bubble, but also a growing focus on the implications of AI for what Warren calls our rigged tax code. Warren writes: Taxing AI is one way we make sure the winnings from AI benefit all Americans, rather than channeling them only to the wealthy few. If millions of people lose their jobs to AI, we'll need the funds to deliver universal health care so those workers are not bankrupted by a visit to the doctor. If AI transforms the future of work, we'll need to invest in free education and apprenticeships and a new jobs guarantee so that all Americans have good paying work. And while workers get back on their feet, we'll need the revenue to bolster unemployment insurance to keep families afloat.

Speaker 1 · 4:19The only way we can get there, she writes, is by overhauling our tax code. Now, in the next couple paragraphs, she focuses on tried and true complaints around things like the effective tax rate billionaires paybasically, stuff that has nothing to do with AI itself. However, she writes: Rethinking our tax code must also include going to the source. That means taxing AI companies directly, which can start with taxing AI data centers. The majority of AI data centers are controlled or operated by trillion dollar companies.

Speaker 1 · 4:43By imposing a reasonable excise tax on the energy used by data centers, families could recoup some of the gains of AI, while America continues to stay competitive in the AI race. A well designed tax would focus on the companies that can afford it and scale with AI's impact. The bigger the data center, the more they pay. She continues: We can't be afraid to consider even bigger and bolder proposals to tax AI too, including ideas that sound radical today but may quickly become common sense. If we overhaul our tax code and tax AI, we can use that money to build a country that works for everyone.

Speaker 1 · 5:10She concludes: AI was trained on human creativity and intelligence, AI was funded in part by federal investments in scientific research, and AI is powered by data centers that are built on American land and use our shared electric grid. The American people deserve to share in the success of this technology, and I'm willing to work with anyone to get it done. Now, I will be honest: when it comes to innovation policy, I don't normally find myself particularly aligned with Elizabeth Warren, even if there are plenty of other issues we might agree on. However, I will say in this case, if our options are, on the one hand, the Bernie Sanders AOC moratorium on data centers, or option B, the Elizabeth Warren cut everyone in on the benefits of data centers, I'm certainly more inclined philosophically towards that second position. And recently, there have been some surprising voices calling for policies that you might not expect to associate with them.

Speaker 1 · 5:55A couple of weeks ago, for example, Mark Cuban tweeted: We should federally tax tokens at the provider level. Not a lot. Less than 50¢ per million tokens. It will accomplish four things at least: one) It will push the big AI players to optimize tokenization, caching, routing, and localization, which will (two) Reduce energy usage, saving them in energy costs more than what they paid in tax and reducing strain created by the growth in energy consumption, which will (three) generate maybe $10,000,000,000 a year to start, but over the next ten years could grow 30x to 100x, which will (four) create a source of funding to pay down the federal debt or deploy in response to the things AI brings that we don't expect or don't like. At some point, the models will pass it on to customers, of course, that's okay.

Speaker 1 · 6:33Customers will have the ability to choose between providers, or to do everything using open source models locally. Thoughts? And, of course, he got a lot of thoughts. For some, it was the principle of it. Investor Steven Sonofsky wrote: Imagine a bit tax in 1995.