OpenAI early investor says AI needs an income tax overhaul: FT

OpenAI co-founder and early investor Vinod Khosla has called for a major overhaul of the U.S. income tax system to address the economic disruptions expected from widespread AI adoption. In a recent interview with Fortune, Khosla predicted that by 2030, AI systems could perform 80% of current jobs, fundamentally altering the labor market and reducing $15 trillion of U.S. GDP tied to labor. He argued that this shift would create a deflationary shock, with many goods and services becoming significantly cheaper or even free due to automation and AI-driven production.

To manage this transition, Khosla proposed eliminating federal income taxes for individuals earning less than $100,000 annually, starting in 2030. The revenue shortfall would be offset by taxing capital gains at the same rate as ordinary income, a policy he said would place a greater burden on high-net-worth individuals. He also suggested the creation of a national wealth fund, modeled after Norway's oil fund, to distribute AI-driven productivity gains more equitably.

Khosla emphasized that without proactive policy changes, the transition could lead to social unrest and a breakdown of trust in capitalist systems. He warned that nations failing to adapt to AI-driven economic shifts risk falling behind globally, citing Germany's restrictive labor laws as an example of resistance to automation. His vision includes universal basic income, robot taxes, and near-free government services to support a post-labor economy.

While some analysts have raised concerns about the feasibility of such sweeping reforms, Khosla remains optimistic that AI will ultimately create abundance and free people from undesirable work. According to his analysis, the challenge lies in ensuring that policy evolves alongside technology to prevent economic and social instability.