Marketplace Tech · Monday, September 14, 2026
The widespread adoption of AI could lead to a substantial decrease in government tax revenue, particularly from personal income taxes, which currently form the largest source of federal income. This is because AI may displace human workers, reducing the overall taxable income generated by human labor.
“If AI means a lot of people get thrown out of work, then are personal income goes down because we're out of work, right? And we pay less tax.”
“That is a big deal, Megan, because 66% (there's another calculation that it's three quarters) of the revenue that the federal government generates for itself is by taxing human labor.”
“So for a time, federal, state, and even some local budgets could take a hit, possibly a nasty hit.”