EMBARGOED UNTIL 4:30 PM ET, DECEMBER 20, 2016
critical to maintain and strengthen tax credits that encourage and reward work while helping
families make ends meet, such as the Earned Income Tax Credit and Child Tax Credit.
Advanced AI systems could reinforce trends of national income shifting from labor to capital, as
discussed above. With investment income heavily concentrated among high-income individuals,
this shift could significantly exacerbate the rise in income inequality seen over the past few
decades, absent an appropriate policy response. Taxing capital can be a highly progressive form
of taxation, yet under the current tax system, individuals’ capital income currently enjoys lower
tax rates than labor income, and often goes untaxed. President Obama has proposed reforming
capital taxation and raising revenue by ensuring that inherited assets are subject to capital gains
tax (ending so-called “stepped up basis”); increasing the top rate on capital gains and dividends
for high-income households to 28 percent, the rate under President Reagan; and increasing the
estate tax by restoring its 2009 parameters and closing loopholes. Some experts have proposed
other reforms, including taxing capital gains on a mark-to-market basis and further reforming
taxes on wealth transfers.
Preparing for all contingencies
If job displacements from AI are considerably beyond the patterns of technological change
previously observed in economic history, a more aggressive policy response would likely be
needed, with policymakers potentially exploring countervailing job creation strategies, new
training supports, a more robust safety net, or additional strategies to combat inequality.