Playing Around With AI

AI is purportedly going to take over our lives. Personally, I don't see it. All it does is slice and dice all the content on the internet, then using probabilistic techniques predict what word would most likely follow a prompt and continue from there. At various stages of this process, randomness is introduced if the choice of next word has several equally probable options.

Given this, all we will ever get out of AI is very likely sounding words. I don't think we will get truly new insight. But it is still early days and the predicted date that AI will take over and make humanity obsolete has a few years yet before it happens.

So how to make use of this technological wonder? I've used it to rewrite this very same website using tailwind css instead of the obsolete Bootstrap framework. Did a good job and saved me time. I've asked AI to come up with a weekend iteneray for my recent trips to St. Petersburg, FL and San Antonio, TX. Did a job no better than I could and I didn't take the vast majority of its recommendations.

At current state of the art, AI seems like a pretty smart high school student who can do things you tell it to, but the depth and insight it provides is nothing to write home about.

What else can AI do? Let's ask it to solve our current budgetary issues using the following prompt:

Design a progressive tax policy for the USA that would 1) maintain social security largely as it is, but with possible means testing 2) maintain current Medicare and Medicaid programs and 3) eliminate the deficit and start paying down the national debt

It came up with the below. I had to tweak it to weight more of the burden to the ultra wealthy, so not strictly progressive. How reasonable is this? Is it beyond "Smart High School Student" level?

Progressive Tax Policy for Deficit Elimination and Debt Reduction

Executive Summary

This policy proposal aims to eliminate the federal deficit and begin debt reduction while preserving Social Security, Medicare, and Medicaid. The plan generates approximately $1.2-1.5 trillion in additional annual revenue through progressive taxation, targeting higher earners and wealth accumulation.

Individual Income Tax Reform

New Progressive Tax Brackets

• 8%: $0 - $20,000 (singles) / $0 - $40,000 (married)
• 12%: $20,001 - $50,000 / $40,001 - $100,000
• 18%: $50,001 - $100,000 / $100,001 - $200,000
• 24%: $100,001 - $200,000 / $200,001 - $400,000
• 32%: $200,001 - $500,000 / $400,001 - $1,000,000
• 42%: $500,001 - $1,000,000 / $1,000,001 - $2,000,000
• 52%: $1,000,001 - $5,000,000 / $2,000,001 - $10,000,000
• 62%: $5,000,001 - $10,000,000 / $10,000,001 - $20,000,000
• 72%: Over $10,000,000 / Over $20,000,000

Capital Gains Reform

Short-term gains (under 1 year): Taxed as ordinary income Long-term gains:

• 0%: Income under $60,000 (singles) / $120,000 (married)
• 10%: $60,001 - $150,000 / $120,001 - $300,000
• 20%: $150,001 - $500,000 / $300,001 - $1,000,000
• 35%: $500,001 - $2,000,000 / $1,000,001 - $4,000,000
• 45%: Over $2,000,000 / Over $4,000,000

Wealth and Investment Taxes

Annual Wealth Tax

• 0.5% on net worth $10-25 million
• 1.5% on net worth $25-100 million
• 3% on net worth $100 million - $1 billion
• 5% on net worth over $1 billion
• 8% on net worth over $10 billion

Financial Transaction Tax

• 0.1% on stock trades
• 0.05% on bond trades
• 0.005% on derivatives trades

Estate Tax Enhancement

• Lower exemption to $3 million per person ($6M per couple)
• Progressive rates: 35% to 70% for largest estates
• 70% rate applies to estates over $1 billion
• Close valuation loopholes for family businesses

Corporate Tax Reform

Corporate Income Tax

• Base rate: 28% (up from 21%)
• Minimum tax: 15% on book profits for corporations with over $1 billion in revenue
• Small business rate: 21% for first $1 million in profits

International Tax Measures

• Global minimum tax: 21% on foreign profits
• Enhanced BEAT (Base Erosion and Anti-Abuse Tax): 15%
• Strengthen transfer pricing rules

Social Security Modifications

Payroll Tax Changes

• Remove salary cap on Social Security taxes (currently ~$160,000)
• Apply 12.4% Social Security tax to all earned income
• Add 3% Social Security tax on investment income over $200,000

Means Testing Implementation

• Gradual benefit reduction for individuals with over $100,000 in retirement income
• Full benefits maintained for those with under $80,000 total retirement income
• Sliding scale reduction between $80,000-$150,000

Revenue Enhancement Measures

Tax Compliance and Enforcement

• Increase IRS funding by $80 billion over 10 years
• Enhanced audit capabilities for high-income taxpayers
• Strengthen cryptocurrency reporting requirements

Loophole Closures

• Limit state and local tax deduction to $15,000
• Cap mortgage interest deduction at $500,000 loan value
• Eliminate carried interest loophole
• Strengthen alternative minimum tax

New Revenue Sources

• Carbon tax: $50 per ton CO2, rising $10 annually
• Digital services tax: 3% on large tech companies
• Bank levy: 0.15% on assets over $50 billion

Projected Revenue Impact

Annual Revenue Increases (Estimated)

• Individual income tax changes: $400-500 billion
• Wealth tax: $200-300 billion
• Corporate tax increases: $200-250 billion
• Social Security cap removal: $150-200 billion
• Financial transaction tax: $75-100 billion
• Carbon tax: $100-150 billion
• Other measures: $75-100 billion

Total Additional Revenue: $1.2-1.6 trillion annually

Deficit Elimination Timeline

Phase 1 (Years 1-2): Deficit Reduction

• Current deficit: ~$1.7 trillion (2024)
• New revenue: $1.2-1.6 trillion
• Remaining deficit: $100-500 billion

Phase 2 (Years 3-5): Deficit Elimination

• Economic growth effects increase revenue
• Full implementation of all measures
• Achieve balanced budget by Year 4

Phase 3 (Years 5+): Debt Reduction

• Annual surplus: $200-400 billion
• Begin systematic debt reduction
• Target 10% debt-to-GDP reduction over decade

Implementation Strategy

Gradual Phase-In

• Wealth tax: 3-year phase-in
• Higher income brackets: Immediate implementation
• Corporate changes: 2-year transition
• Social Security changes: 5-year phase-in for means testing

Economic Considerations

• Built-in recession adjustments for progressive rates
• Small business protections and credits
• Investment incentives for productive capital
• Research and development tax credits maintained

Social Program Preservation

Social Security

• Full benefits maintained for 95% of recipients
• Enhanced benefits for lowest earners
• Disability and survivor benefits unchanged
• Trust fund solvency extended indefinitely

Medicare and Medicaid

• No benefit cuts or eligibility changes
• Enhanced funding for program expansion
• Prescription drug cost controls
• Provider payment reforms for efficiency

Conclusion

This progressive tax policy framework generates sufficient revenue to eliminate the federal deficit within 4-5 years while preserving essential social programs. The approach prioritizes higher contributions from wealthy individuals and corporations while maintaining middle-class tax relief. Success depends on strong enforcement mechanisms and gradual implementation to minimize economic disruption.