Elizabeth Warren's New Tax Proposal Would 'Benefit All Americans'

If you've been struggling to keep up with increased energy costs, Senator Elizabeth Warren's new proposal might help pay for your bills. On May 27, Warren published an op-ed in "TIME" calling for a tax overhaul, including a new AI tax on the energy consumed by AI data centers to help offset rising utility costs that many families face.

Here's what to know about her proposal, the effects it might have, and whether it might pass.

How AI is shaping wealth

Warren argued that AI is creating tech billionaires but also prompting companies to lay off workers as AI replaces them. At the same time, AI data centers are driving up utility bills, and according to Warren, families who live near large data centers have seen electricity costs increase by 267% over the past five years.

AI also has the ability to automate many white-collar tasks, which could change the labor market. Warren noted that since health care is often connected to employment, an AI wave could lead to families losing income and their health insurance.

"Tech executives have warned that AI could lead to 'a level of wealth concentration that will break society' and create a 'permanent underclass,'" Warren wrote.

Why Warren wants to revise the tax code

Warren argued that the tax code needs to be revised, especially in light of AI. "Taxing AI is one way we make sure the winnings from AI benefit all Americans, rather than channeling them only to the wealthy few," she wrote.

She highlighted the fact that if millions of Americans lose their jobs to AI, the country may need the tax revenue to provide universal health care to ensure those workers aren't bankrupted by health care needs. And if AI alters the future of work, the country must be prepared to invest in free education, apprenticeships, and a new jobs guarantee to ensure that citizens are able to access good-paying jobs. If AI results in major layoffs, the tax revenue generated could also be used to bolster unemployment insurance to support those affected families.

Taxing AI data centers

Warren's proposed tax overhaul centers around taxing AI companies directly, including taxing AI data centers. She explained that since most AI data centers are controlled or operated by trillion-dollar companies, a reasonable excise tax on the energy those data centers used could help families recoup some of the benefits of AI. At the same time, America could continue to stay competitive in the AI race.

Warren wants taxes to be applied proportionately with each data center's size. "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," wrote Warren.

Making corporations pay

Warren proposed starting the tax overhaul by making corporations "pay their fair share." Since companies currently pay payroll taxes for workers but receive tax breaks for investing in technology, the current tax code is effectively penalizing them for hiring humans while giving them a tax break for buying equipment. "In an AI world, that means our tax code is incentivizing corporations to fire people and replace them with AI," Warren argued.

She proposed raising taxes on corporations and capital gains and closing corporate loopholes as a potential solution.

Implementing a wealth tax

Warren also used the opportunity to emphasize the importance of a wealth tax, which she's been outspoken in supporting. She explained that some of the wealthiest individuals in America pay a lower tax rate than a public school teacher because the tax system taxes income but not wealth.

AI might create more billionaires using the same methods, in which they get rich off stock valuations but avoid paying the taxes they would owe if they earned those same funds through a salary. Warren argued that AI makes it unquestionably clear that the country needs to implement a wealth tax.

The potential for more expansive AI taxes

Warren briefly floated the idea of "bigger and bolder" proposals for AI taxes, such as "ideas that sound radical today but may quickly become common sense." She didn't clarify just what those ideas were, but explained that she believes that overhauling the tax code and taxing AI could generate money to "build a country that works for everyone."

An alternative stance

OpenAI CEO Sam Altman has spoken out about AI's potential to transform American lives for the better while using an approach that differs from Warren's. Altman and OpenAI propose a public wealth fund that would allow all citizens, not just investors, to benefit from the economic growth AI drives.

OpenAI also proposes leveraging the increased efficiency that AI provides to create enhanced worker benefits. For example, the company proposes increasing retirement matches and contributions and even running a pilot program for 32-hour workweeks with employees being compensated for 40 hours.

Bottom line

AI is a hot topic, and Warren's proposal faces a difficult legislative environment, as AI regulation has broadly been stalled by partisan disagreement. That said, this proposal may be a starting point in what is likely to become a larger policy debate over whether AI profits should be redistributed to the public and how to protect the public against the unwanted effects of AI.

As families face rising energy costs and potential job losses due to AI automation, an AI tax might help them get ahead financially, but we'll have to wait and see just where the conversation around taxing AI heads.

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