- AI-induced economic growth is expected to improve federal debt sustainability, but revenue gains may be reduced if growth favors capital over labor due to lower capital tax rates.
- Under a rapid AI adoption scenario with 3.3% annualized GDP growth, federal revenues could increase by up to $216 billion by 2030, a 3.3% rise from the CBO baseline.
- Revenue gains from AI would be roughly twice as large if capital and labor income shares remained fixed, highlighting the impact of capital's preferential tax treatment.
- Capital income faces lower average tax rates than labor, and much of it (e.g., unrealized gains, retirement benefits) is exempt from taxation, reducing overall revenue collection.
- AI alone is unlikely to solve fiscal sustainability problems because it may not generate as much additional revenue as anticipated, and its effects on spending and tax administration remain uncertain.