"As artificial intelligence becomes more mainstream, many people are using it to do things that they would normally hire someone else to do. AI is helping people conduct research, analyze options, and even create artistic works. While this makes certain things easier and more efficient, it means that some people will get reduced work or lose their livelihoods. For governments that have to look at the big picture, this means more unemployment which translates to less tax revenue, with an emphasis on social security funding."
"Employees and business owners pay into social security and Medicare. Employees do so through paycheck withholdings and business owners pay self-employment taxes on their net business profit. While this tax is pretty substantial - 7.65% for employees and 15.3% for self-employed business owners, there is a cap on the income that is subject to the tax. For 2026, the income cap is $184,500 so any income above that is not subject to social security taxes although it is subject to Medicare taxes."
"If jobs are replaced by AI, then the government will lose these social security tax and Medicare tax payments. The solvency of the social security trust fund has been a concern in the past few decades and, based on projections, the trust fund is on track to be insolvent in 2032. If insolvency is certain, then the government will have to make tough decisions to save the social security trust fund, either by cutting benefits, raising the eligibility age, or raising taxes."
As artificial intelligence becomes mainstream, people increasingly use it to perform tasks previously done by hired workers, including research, analysis, and creative work. That substitution can reduce demand for labor, causing unemployment and lower payroll tax collections that fund Social Security and Medicare. Employees pay 7.65% via withholdings and self-employed pay 15.3% of net profit, with a 2026 Social Security wage cap of $184,500; income above that remains subject to Medicare taxes. Projections place the Social Security trust fund on track for insolvency around 2032. Possible policy responses include cutting benefits, raising eligibility ages, or increasing taxes.
Read at Above the Law
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