Stocks for Thoughts · Nobody taxes a machine

Twenty-five cents of every dollar.

The market has priced twenty-five trillion dollars on AI taking a cut of the world's wages. There is already a claim on that wage bill, and it is the one that pays for the American state. Not a forecast — this is what the tax code collects today.

OneOne dollar of American wages
Before the worker sees it, three federal taxes come off the same dollar.
10¢
3¢
12¢
75¢  stays with the worker and the employer
25¢ to Washington
10¢ · Social SecurityPayroll tax, both halves, after the earnings cap
3¢ · MedicareHospital insurance, no cap
12¢ · Income taxThe share of it that falls on wages, not capital
TwoEvery dollar of American wages
Run those same three taxes across a $13.4 trillion wage bill and you have most of the federal government.
Total federal receipts $5.23 trillion a year
$1.34tn
$0.4tn
$1.61tn
$1.88tn  everything else
$3.35tn — 64% of federal revenue is a tax on somebody working
$1.88tn · everything elseCorporate tax, tariffs, excise, estate, Fed remittances — all of it, combined
$452bn · corporate income taxOne seventh of what labour pays. Customs and tariffs: $195bn
What a displaced slice of the wage bill costs the Treasury, per year
2%
$67bn
1.3% of federal revenue
5%
$168bn
3.2%
10%
$336bn
6.4% — three quarters of the entire corporate income tax
20%
$672bn
12.8% of receipts — about 2.2% of GDP a year
Put against the number Washington argues about most, on the same footing. The Trustees size Social Security's seventy-five-year shortfall at 1.5% of GDP — which is already an annual figure, the average adjustment they calculate is needed in every year from now to 2100. A twenty per cent displacement costs about 2.2% of GDP a year. Larger than the gap that gets a commission every few years and gets closed by nobody. And the grip loosens exactly where the money is going: wages are 84% of the income tax paid in the $30–50k band, 59% at a million, and 36% above ten million. Past waves of automation hit people who weren't funding much. This one walks uphill toward the people who are.
Method: the three federal taxes on labour income, expressed per dollar of the ~$13.4tn US wage and salary base. Social Security shows below its 12.4% statutory rate because earnings above the OASDI cap are untaxed; Medicare's 2.9% has no cap. The income-tax cent count uses the wage share of individual income tax liability, not the wage share of AGI — wages are 66.8% of AGI but 59.9% of liability. "Everything else" is total receipts less the three labour taxes. What the 25¢ is and is not: a constructed blended federal burden on a dollar of wages, not a statutory rate anyone is charged. It includes both halves of payroll tax, which the legal employer remits but which economists generally treat as borne largely by the worker through lower pay — legal incidence and economic incidence are not the same thing here. Displacement rows apply that blended rate to the stated slice of the wage bill and are static first-round losses: they assume no offsetting revenue from whoever captures the displaced income, no corporate tax on higher profits, no consumption-tax effect, no benefit change and no wage adjustment. Which of those offsets appears, and how heavily it is taxed, is the subject of the note. Sources: CBO, Monthly Budget Review: Summary for Fiscal Year 2025 (Nov 2025), Table 2 — total receipts $5,235bn, individual income $2,656bn, payroll $1,748bn, corporate $452bn, customs $195bn; BEA NIPA compensation of employees; IRS Statistics of Income for the wage share of liability; the 2026 OASDI Trustees Report for the actuarial balance, which that report states as “4.42 percent of taxable payroll, or about 1.5 percent of GDP” and defines as the average adjustment needed in each year across 2026-2100 - so it is already an annual measure and can be set beside an annual flow. Not investment advice.