Raghuram Rajan pitches AI tax amid ‘jobocalypse’ fear

Former Reserve Bank of India governor Raghuram Rajan has proposed an AI tax to address concerns about job displacement due to artificial intelligence. In a Project Syndicate column titled "How Corporations Can Mitigate an Al Jobocalypse," Rajan suggested that governments could tax the AI "tokens" companies use and offer incentives to encourage businesses to retrain and retain employees.

Rajan argues that the current lack of equivalent charges for AI usage compared to employing a person can make automation financially more attractive, even when accounting for the broader economic cost of job displacement. His proposal begins with a relatively low tax rate on AI usage, which would gradually increase as governments learn more about the technology's impact on employment.

Rajan cautions against overly pessimistic predictions about AI, emphasizing that the pace of adoption matters as much as the technology itself. He believes AI will not suddenly wipe out millions of jobs but that the way companies adopt the technology will be crucial. Rajan also suggests tax credits for companies that invest in retraining workers whose jobs are affected by AI, aiming to make continuous reskilling a more standard part of the employment model.