Why We Need an AI Tax in This Age of Job Displacement

In the fall and winter of 2025, a wave of global layoffs driven by artificial intelligence (AI) quietly intensified. According to data from Challenger, Gray & Christmas, by September 2025, nearly 950,000 job cuts had been announced in the United States, marking the highest figure since the COVID-19 pandemic.  

What stands out about this layoff wave is that it’s no longer solely about traditional cost-cutting. The rapid and widespread adoption of AI technologies has prompted companies to undertake structural reorganizations. Many mid-skilled and even some high-skilled positions are being replaced at an unprecedented rate, particularly in management, customer service, content moderation, and entry-level analytics roles. The impact is both far-reaching and profound. 

For instance, Salesforce cut about 4,000 customer service staff after deploying AI agents, and Amazon is laying off about 14,000 employees. These examples are far from isolated, highlighting a broader trend where AI is redefining job roles and reshaping how companies assess human value. The efficiency-driven restructuring, unfolding in the absence of policy constraints, is transforming the labor market at a pace not seen before. 

This transformation was already anticipated by many observers,  and the greatest concern is not the uncontrollability of the technology itself, but its systemic reshaping of the employment structure. On one hand, AI has a strong substitution effect, putting a wide range of mid-skilled and even some high-skilled jobs at risk. On the other hand, the new employment opportunities AI creates depend heavily on individuals’ ability to learn and access resources, leading to significant class-based disparities. This technology-driven polarization of the job market is expected to exacerbate social inequality, presenting tangible challenges to both economic sustainability and social stability. Given AI’s profound impact on the labor market, policymakers must adopt a prudent, human-centered approach. Technological progress should ultimately serve humanity, not replace it. 

In response, a solution should be the implementation of an “AI tax”, a systemic measure designed to address the wave of AI-driven layoffs. The AI tax would be levied on companies that significantly reduce their workforce due to large-scale AI adoption. The tax would be calculated based on the proportion of profits derived from AI-driven productivity improvements. The revenue from this tax would then be redirected to support retraining programs, basic livelihood support, and education and reskilling initiatives for individuals displaced by AI. The goal of the AI tax is not to hinder technological advancement but to introduce a corrective element into the market, encouraging companies to balance efficiency gains with a stronger sense of social responsibility. 

The underlying vision of the AI tax is to redistribute the economic benefits of technological progress more fairly. As companies replace human labor on a large scale to cut costs and increase profits, the workers displaced face a harsh reality: disappearing jobs, outdated skills, and disrupted livelihoods. This transition cannot be managed by individuals alone. If policy remains indifferent to those who profit from AI while vulnerable groups bear the risks, the result could be unjust and lead to long-term social instability. The AI tax is designed to balance technological progress with social stability, helping mitigate the structural unemployment risks brought about by AI and creating a cost boundary that encourages more responsible adoption of AI technologies. 

Similar taxation models exist in history. For example, carbon taxes address the external costs of pollution, holding polluters accountable. Likewise, external costs should not be borne solely by the unemployed due to job displacement caused by AI. Instead, business entities benefiting from AI-driven profits should share those costs. The AI tax could, in this way, become the first special tax designed to respond to a general-purpose technological revolution, going beyond economic regulation to define the ethical boundaries of technological progress and establish a new social contract between technology, capital, and society. 

Importantly, the AI tax does not aim to treat AI as an enemy but rather to humanize its impact through institutional design. It asserts that technological progress must consider the ethics of employment and that corporate profitability must reflect its social consequences. The AI tax is not purely punitive; it could be structured as a phased, proportional, or even refundable incentive mechanism. For example, companies that pursue human–machine collaboration instead of replacing human workers entirely could receive tax rebates for maintaining employment. Firms investing in retraining programs for displaced employees could qualify for tax credits. This flexible design would allow the AI tax to function as both a regulatory and incentive-based policy tool, encouraging a balance between technological efficiency and social responsibility. 

AI is now an irreversible force of our era, and we cannot and should not attempt to halt technological progress. However, this progress must be guided through institutional design to ensure it ultimately benefits the public good. The AI tax represents an actionable policy tool that addresses the real and pressing social challenges emerging alongside technological advancement. More than just a fiscal measure, it embodies human rationality and responsibility, ensuring that technological power remains aligned with humanity’s broader ethical and social interests.