Ask a GW Expert: How Could Tax Policy Mitigate Harms Caused by Artificial Intelligence

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At their barest essentials, politics and governance come down to taxes-who pays what, and how the money is used. When he realized that tax law could be a potent policy tool in determining how society's wealth is distributed, Jeremy Bearer-Friendheard a call to action.

"Essentially, the people who didn't want to pay taxes were the ones writing the tax rules," Bearer-Friend said. "It just seemed like there was a need for people who were public-interest-minded to do this more technical finance stuff. It's not very flashy, but it really does matter."

In the article "Sharing the Algorithm: The Tax Solution to Generative AI," written with his former GW Law colleague Sarah Polcz (now an intellectual property professor at the University of California, Davis) and published in the Columbia Journal of Tax Lawin 2025, he proposed the creation of a sovereign wealth fund to compensate the public for harms caused by AI. GW Today asked Bearer-Friend to talk about his research.

Q: How Could Tax Policy Mitigate Harms Caused by AI?

A: There are a lot of reasons to be concerned about where AI is headed, but in our article, "Sharing the Algorithm," Sarah Polcz and I focused on four harms in particular. First is the theft. Troves and troves of data were taken without consent. That's a harm that's already occurred, not a future harm that we're speculating about. Our data trained these machines, and they're worthless without what they took from us without asking. That in itself entitles us to co-ownership. We helped build it, and so we get to have some of it.

The next harm, also already happening, is algorithmic bias, the way that AI compounds biases that are already in data, but adds this sheen of neutrality to it. It seems official and unbiased, even though it's actually feeding you discrimination.

In addition to bias and theft, another concern was the impact of AI on the labor market. Are we substituting AI for workers? Then what are workers going to do? Our proposal could be a payout to help subsidize lost wages or other economic consequences. This fund is going to be worth a lot if the economic impact of AI is substantial, so it will create something of a safety net because people will be holding capital instead of just depending on wages.

And then there's the impact on revenue. These firms are pretty much not paying anything in tax. We're actually subsidizing them. Our tax code has lots of ways of reducing tax rates on companies that are doing AI. So we propose an additional tax on these firms. It would not replace the corporate income tax-it's on top of that-but it would be a one-time tax paid with stock instead of cash. And that would allow the public to hold a share in these firms.

I posted a manuscript of the article back in October 2025, and three different Senate offices reached out to me within a week. In a recent op-ed for the New York Times, Bernie Sanders cites us, and his legislation is based on our idea-though we never specified a tax rate in our own work. We proposed that a sovereign wealth fund be created and managed in trust for the public, with every American receiving a check from this fund annually. The fund would be capitalized by a tax on AI firms paid in stock, not cash. This would not replace other revenue. We still have taxes for Social Security. We still have corporate income tax. So, if in the end these companies are just a bubble, we haven't relied on them to substitute for other funding. This is all just gravy.

I think a version of this will absolutely happen. It's just a question of what it's going to look like. Sovereign wealth funds are common across countries, and we have them at the state level, but we don't have a federal one in the U.S. One model in California is the CalPERS fund. This is the retirement fund for public employees in the state. It holds over $300 billion in assets and has its own professional board. They are transparent. They're accountable to the public. They make trading decisions. A different version is the Alaska Permanent Fund. There, the state owns these natural resources, and it pays out a check every year, based on the value of those natural resources. But the Permanent Fund is principally invested in Alaska's natural resources, which have different value depending on the year.

This doesn't solve everything. We need to regulate AI, too. But it's part of the solution. Sharing this prosperity is essential.

Before going into academia, Bearer-Friend worked as tax counsel to Sen. Elizabeth Warren (D-Mass.). At GW Law, he teaches classes on federal income tax, tax-exempt organizations and a seminar on redistribution and reparations.