Could Artificial Intelligence Bankrupt Social Security?

Source Domain: abovethelaw.com

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. Could AI pose a serious threat to future social security and Medicare funding? If so, what can be done about it?

Many people are concerned AI will take over white collar jobs that humans do now. While the technology is not perfect — which some lawyers have learned the hard way — it is improving. The worry was so bad that in 2023, Hollywood writers and actors went on strike. to prevent studios from using AI for drafting stories and using actors’ likenesses.

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…

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