AI Tax Proposed to Offset Job Losses in the U.S.
According to Alap Shah artificial intelligence may significantly displace workers and disrupt consumption-driven economies like the US in the near future. He is now advocating for an AI tax to help mitigate job losses. “Governments should consider taxing incremental or windfall gains from AI,” Shah said in an interview. In the absence of it, increasing unemployment will impact consumption, with the US expected to be one of the most affected countries. Shah outlined a scenario in which 5% of white-collar workers might be eliminated within a span of 18 months. “We generally have a set of shorts out against businesses that we think are going to be disrupted by AI,” he stated on Tuesday in Asia. “On the other side of that, we own a lot of semiconductors that we think are going to benefit.” In recent weeks, technology shares have experienced a decline due to apprehensions that AI may disrupt established business models. A report over the weekend has intensified worries regarding potential widespread disruption and job losses. The article envisions a 2028 landscape where swift progress in machine intelligence significantly boosts productivity, yet simultaneously makes vast segments of human labor redundant. This shift leads to job losses, a decline in consumer spending, and a downturn in stock indexes such as the S&P 500.
Among the outcomes discussed, the displacement of white-collar workers creates a negative feedback loop: firms cut jobs to bolster margins, reinvest savings in AI, which enables further cuts. This diminishes demand in sectors reliant on intermediation, including finance, insurance, and software. Platforms that cater directly to consumers and depend on discretionary spending — such as food delivery services like DoorDash and Uber Eats — are perceived to be at the highest risk. The report led to a worldwide selloff in software stocks, with a related exchange-traded fund dropping 4.8% and extending its decline from a peak in September to approximately 35% amid worries that AI could undermine earnings. In contrast, Asia’s leading chipmakers surged to unprecedented highs on Tuesday. Taiwan Semiconductor Manufacturing Co., Samsung Electronics Co., and SK Hynix Inc. each experienced an increase of over 2.5%. Shah expressed his surprise at the market reaction. “I thought there was going to be a small reaction — it was definitely larger than we expected,” he stated. In the coming five years, he stated that white-collar jobs in the US will serve as a crucial indicator of AI’s effects, with the impact expected to manifest most rapidly in this sector due to its dynamic labor market. According to the Citrini paper, white-collar workers represent 50% of employment and are responsible for approximately 75% of discretionary consumer spending. “It’s much easier to fire folks than it is in other parts of the world,” he added.
According to the company website, Shah serves as the chief executive officer of AI firm Littlebird and is also the managing partner at Lotus Technology Management. He co-founded the subscription meal service Thistle and held the positions of CEO and chairman at the financial data platform Sentieo, which was subsequently acquired by AlphaSense. Citrini has been delivering macro and thematic stock research since 2023. The firm was established by James van Geelen, who initially embarked on a career in medicine before transitioning to launch an alternative healthcare company that was subsequently sold, as stated on his LinkedIn profile. He also co-founded one of Connecticut’s first medical marijuana dispensaries, as he stated. The platform has garnered a dedicated audience, boasting over 119,000 subscribers. The research encompasses a range of subjects, including modern warfare, humanoid robots, GLP-1 drugs, and wider macro trends.
Reflecting on China’s experience, Shah remarked that automation has “rolled through the economy in a big way.” Companies are not generating jobs at the necessary rate, as the average firm is capable of achieving much more with a reduced workforce — and is increasingly opting against hiring. That diminishes consumer demand and exerts pressure on the economy, a situation he envisions as plausible for the US in the coming two years. In the near term, Shah anticipates additional market fluctuations, particularly within software companies, as traders evaluate the lasting effects of AI. “We are entering a really highly volatile time in the markets,” he stated.
