AI Employees Don’t Pay Taxes
31st December 2025
I recently overheard a conversation in a River Falls, Wisconsin, coffee shop that has stayed with me.
A person was venting to a friend about being forced to use AI—likely Microsoft Copilot—within a work spreadsheet. After several rounds of frustrating trial and error, she eventually gave up and finished the task manually. In the end, the “shortcut” had cost her more time than if she’d just done the work herself from the start.
To many, this looks like failure, but I see it as a green flag. It is a sign that the system is working exactly as it should: by keeping a human in the loop, much like a pilot in a cockpit. Being frustrated is proof, to me, they’re effectively using this amazing tool in the real world.
But if we want to phase out human-in-the-loop systems for AGI, there is one critical problem we must solve first—at least, if we care about society. Beyond the technical hurdles, the real challenge is taxes.
Governments are funded by people, not software. Our schools, roads, and healthcare systems rely on the taxation of human income. When a worker is removed from the equation, that tax base vanishes with them. At scale, the “efficiency” of AI creates a massive shortfall in public revenue. The results are predictable: crumbling infrastructure, reduced services, and an even heavier tax burden on the few workers who remain.
If you think that governments won’t figure out a way to tax them anyway, then you’re delusional.