The bill would calculate the tax in two ways and charge whichever amount is higher, using rates that start at 2% and 3% and rise when unemployment exceeds 5%.

Rep. Greg Casar (D-Texas) introduced an AI tax bill that would tax commercial access to large, general-purpose AI models and their use to reduce company workforces, then direct the revenue to a new federal jobs program.

The AI Tax and Work Protection Act, or H.R. 10044, was introduced Aug. 6 with Reps. Valerie Foushee (D-N.C.) and Sara Jacobs (D-Calif.) as co-sponsors.

The bill was referred to the House Education and Workforce Committee and the House Ways and Means Committee. It has not passed either chamber of Congress.

Companies would pay the higher of two tax calculations

The bill defines covered models as AI systems trained for a wide range of uses with at least 1025 computing operations, or another threshold set by the Treasury Department to capture models with comparable capabilities.

AI developers would be taxed when they sell access to a covered model or use one themselves to reduce their workforce. Transactions with affiliated companies would also be covered when the model’s use enables or results in workforce reductions.

The tax would be based on whichever of two calculations produces the larger amount.

The first would equal 2% of the estimated market value of the tokens processed in covered transactions.

The second would equal 3% of the value of covered AI-service transactions. That calculation would include payments received from customers and the estimated market value of covered transactions with affiliated companies.

The tax would target companies that develop covered AI models, sell access to them, or modify models whose core files can be downloaded and changed. Businesses that only purchase or use AI services would not be taxed.

Research and development uses by governments, universities, federally funded research centers, and qualifying nonprofits would be excluded.

Tax rates would increase with unemployment

The bill sets base tax rates of 2% and 3% for the two calculations. Those rates would remain unchanged as long as the unemployment measure stayed at or below 5%.

For unemployment between 5% and 7%, each rate would increase by the number of percentage points above 5%. At 6% unemployment, for example, one percentage point would be added, raising the rates to 3% and 4%.

Above 7% unemployment, the increase would double. At 8%, the unemployment rate would be three percentage points above 5%. Doubling that increase would add six percentage points, raising the tax rates to 8% and 9%.

The bill would look back over the previous three calendar years and use the highest U-4 unemployment rate. U-4 includes unemployed people and people who have stopped looking for work because they believe no jobs are available.

The Treasury Department could exclude unemployment caused by a war, pandemic, or other major economic shock unrelated to AI when applying the higher rates.

If enacted, the tax would apply to covered transactions beginning one year later.

Tax revenue would fund jobs through the Department of Labor

The bill would direct the tax revenue to a new federal trust fund. The money would support a Work Protection Administration established within the Department of Labor.

State and local governments, public schools, colleges, universities, and tax-exempt organizations could apply for the grants. The Department of Labor would prioritize proposals that create permanent, full-time jobs. It would also favor state and local governments when they normally perform the proposed work.

The grants could fund permanent, full-time jobs in public services, care work, infrastructure, research, environmental projects, the arts, and local journalism. The work would have to be performed primarily by people rather than AI.

The jobs would include wage, health insurance, and paid-leave requirements. Grant recipients could not use the funding to replace existing workers and would generally have to protect employees’ right to organize.

Grant recipients could create jobs in child care, education, health care, elder care, housing, public infrastructure, scientific research, environmental conservation, disaster preparation, arts and cultural programs, and local journalism. The bill would require the primary duties of these jobs to be performed by people.

The proposal now awaits consideration by the two House committees.