Billionaire VC Vinod Khosla proposes scrapping taxes for 125 million Americans amid AI job fears

[midian182]

Winners & losers: As AI becomes increasingly capable of performing human jobs, fears of mass unemployment keep growing. Billionaire investor Vinod Khosla suggests one way to deal with the problem is to scrap taxes for up to 125 million people in the coming decades, and that the government offsets the lost revenue by increasing capital gains taxes and eliminating certain tax breaks.

In a post on X, Khosla wrote that AI will transform economies and require a rethink of capitalism and equity. "Labor portion of economy (vs capital) will decline sharply," he added. "Should we eliminate preferential treatment of capital gains tax and equalize to ordinary income?"

The Sun Microsystems co-founder included a video in his post highlighting some of the jobs being replaced by AI, including oncologists, accountants, radiologists, network engineers, and many more.

AI will transform economies and need a rethink of capitalism & equity. Labor portion of economy (vs capital) will decline sharply. Should we eliminate preferential treatment of capital gains tax and equalize to ordinary income? 40% of capital gains taxes are paid by those with… pic.twitter.com/7oSA9xj5Ko

– Vinod Khosla (@vkhosla) February 16, 2026

In a follow-up post, Khosla wrote, "Could easily eliminate bottom 125 million taxpayers from the tax rolls and be revenue neutral at the same time with a capital gains tax equal to ordinary income and a few other tweaks."

Khosla added that eliminating certain tax breaks, such as tax-free borrowing against unrealized gains, would also make up the lost government revenue. With around 160 million taxpaying Americans, Khosla's proposal would see roughly 80% no longer paying income taxes.

Critics of Khosla's approach argue that eliminating taxes for a large segment of the population could prove politically and economically difficult, particularly if capital tax increases discourage investment or drive wealth overseas. Supporters, meanwhile, say that aligning capital gains taxes with ordinary income rates would reduce inequality while reflecting the growing dominance of capital over labor.

Could easily eliminate bottom 125 million taxpayers from the tax rolls and be revenue neutral at the same time with a capital gains tax equal to ordinary income and a few other tweaks. Eliminating tax breaks (like tax loss carry over, MLP's, tax free borrowing to invest against… https://t.co/1CcTzeJDwm

– Vinod Khosla (@vkhosla) February 17, 2026

Khosla has long argued that AI could ultimately create abundance rather than scarcity, lowering the cost of goods and services while improving quality of life. Like OpenAI CEO Sam Altman, he previously suggested a universal basic income may be necessary for Americans who lose their jobs to AI – something he believes could affect up to 80% of people.

Khosla's comments arrive amid increasing concerns over AI-driven job displacement. Last week saw Mustafa Suleyman, Microsoft's AI chief, warn that AI will replace most white-collar jobs within the next 12 to 18 months. While companies used to claim that AI would help humans and not replace them, tech giants such as Amazon and Meta are now openly linking mass layoffs to the adoption of the technology. This is despite reports showing that AI use has yet to reap financial returns for most companies.

Permalink to story:

Billionaire VC Vinod Khosla proposes scrapping taxes for 125 million Americans amid AI job fears

 

[Str8Shot]

Never agree to such measures. The Netherlands will be instituting a 36% capital gains tax on UNREALIZED gains starting from 2027. Before long, other nations will follow, because "tax-scavenge mode" is coming for whatever liquidity is left in society, before ensuing genocide. History has always shown this to be the case. Unless people rise up and hang those perpetrating this modern-day slavery, it's coming everywhere, especially the West.

In the case of Khosla, he's proposing one tax to offset another, arguing that most Americans don't participate in the financial markets (or participate passively via 401(k) and IRAs), that this tax would only affect the rich who play in the casino. Always the same proposals, never any meaningful change FOR the people. AI hasn't proven itself, billions are sunk into unfunded future project that demand astronomical energy production that simply isn't available today. And once it is, what will it do to household energy bills. What taxes will they come up with at that point...they never have answers because they're in the business of feeding you headlines and buzzwords that tickle the ears. The jig is up.

 

[TheBigT42]

That is a good way to crash the stock market.

Instead do away with all taxes and institute a National Sales Tax. Exclude basic necessities and have higher rates for luxury items like cars over $80,000 or $90,000...Mansions...Yachts...etc.

That way everyone pays there fair tax...including criminals that don't pay taxes and tourists from other countries.

Sales taxes is how some states like Florida don't have a State Income tax.

 

[JMGuy]

I think the most interesting part of this proposal isn’t the tax mechanics—it’s what it signals about where our economy may be heading. If AI materially reduces the economic value of labor, then shifting taxation toward capital isn’t punitive, it’s structural. The deeper issue, as I see it, is what happens to democratic incentives.

If a large majority funds government only indirectly, while a small minority carries most of the tax burden, politics will certainly harden into redistribution versus capital preservation. Representation becomes exclusively anchored to those who fund the machine. This is why we talk so much about PAC’s vs small-donor metrics in our current politics.

One way to ease the tension might be to treat AI—from hardware through software—more like public infrastructure than a private proprietary advantage. If access to advanced AI were regulated with baseline availability and non-discriminatory public oversight, the gains wouldn’t concentrate power only to the few firms that own the models. Broad access could diffuse productivity benefits and reduce the zero-sum dynamic between voters and capital holders.

I mean, that wouldn’t guarantee stability, and it certainly doesn’t eliminate the need for smart tax policy. But democracies tend to endure best when foundational technologies are widely accessible rather than tightly gate-kept.

If our future is a new revolution that’s going to fundamentally change our governmental power dynamics, then I say it’s time we modernize some historical perspective for that brave new world:

No representation without AI actualization.

 

[gamerk2]

That is a good way to crash the stock market.

Instead do away with all taxes and institute a National Sales Tax. Exclude basic necessities and have higher rates for luxury items like cars over $80,000 or $90,000...Mansions...Yachts...etc.

That way everyone pays there fair tax...including criminals that don't pay taxes and tourists from other countries.

Sales taxes is how some states like Florida don't have a State Income tax.

The problem with a National Sales Tax as your *primary* income solution is the instant the economy slows down for any reason, income plummets. So government has to reduce spending during a recessionary period...which causes income to plummet (through higher job losses due to losses in government assistance).

Income Taxes are *far* more resistant to spikes in unemployment and other economic slowdowns.

 

[gamerk2]

Tbf, lowering the base rate for most all mid/low income earners, removing most tax deductions, and taxing capital gains at the same rate as other forms of income would go a long way to fixing the tax structure. The underlying problem is that because the tax code is a very convenient way to set policy objectives (as it's the one thing where Federal power is almost entirely absolute), doing this makes it more or less impossible to do most policy objectives in a Constitutional manner.

 

[p51d007]

That is a good way to crash the stock market.

Instead do away with all taxes and institute a National Sales Tax. Exclude basic necessities and have higher rates for luxury items like cars over $80,000 or $90,000...Mansions...Yachts...etc.

That way everyone pays there fair tax...including criminals that don't pay taxes and tourists from other countries.

Sales taxes is how some states like Florida don't have a State Income tax.

You mean like the Fair Tax idea?
https://fairtax.org/about/how-fairtax-works

 

[Xelions]

2 options here:

Universal BASIC Income
OR
Conflict in one form or another, whether that be a revolution, or war.

Your going to ask how it's funded!? Increase taxes on the rich, resources, mining, etc. - people will argue higher taxes but no one on here surely is that rich, c'mon ..and when I say rich, I mean wages exceeding 300$/k AUD /year

 

[GFitzpatrick47]

I think the most interesting part of this proposal isn’t the tax mechanics—it’s what it signals about where our economy may be heading. If AI materially reduces the economic value of labor, then shifting taxation toward capital isn’t punitive, it’s structural. The deeper issue, as I see it, is what happens to democratic incentives.

If a large majority funds government only indirectly, while a small minority carries most of the tax burden, politics will certainly harden into redistribution versus capital preservation. Representation becomes exclusively anchored to those who fund the machine. This is why we talk so much about PAC’s vs small-donor metrics in our current politics.

One way to ease the tension might be to treat AI—from hardware through software—more like public infrastructure than a private proprietary advantage. If access to advanced AI were regulated with baseline availability and non-discriminatory public oversight, the gains wouldn’t concentrate power only to the few firms that own the models. Broad access could diffuse productivity benefits and reduce the zero-sum dynamic between voters and capital holders.

I mean, that wouldn’t guarantee stability, and it certainly doesn’t eliminate the need for smart tax policy. But democracies tend to endure best when foundational technologies are widely accessible rather than tightly gate-kept.

If our future is a new revolution that’s going to fundamentally change our governmental power dynamics, then I say it’s time we modernize some historical perspective for that brave new world:

No representation without AI actualization.

It's eerie, but I was thinking to myself last night that the one way the government could nip AI in the bud is treat it (or perhaps the energy guzzling data centers powering it) as a federal public good or infrastructure element.

Hell, considering that AI firms have openly talked about building out nuclear power plants specifically to meet the energy demands, there's a legal pretext there already: anything remotely related to nuclear power is under the purview of the Department of Energy. So, if these firms want their energy to run their data centers (specifically from nuclear power, although you could do this with other energy sources, though less effectively), they must adhere to the strictist of demands from the federal government in regards to regulation.

If they refuse, nationalization is always there, and what's to say that the Antitrust Division of the DOJ doesn't outright carve off the AI from the companies that have made them? Going further, considering how intertwined many of these firms are with the federal government via military contracts (such as Anthropic and Palantir), you even have a national security pretext to put them under sole government control if they don't want to play ball.

That's not to say I'm advocating any of this (although I am firmly on the side of AI being an overblown bubble that's damaging in a myriad of ways), but as you stated, the US federal government has a whole lot of levers it can pull to rein in AI. All you would need is an administration willing to do so, lest they see a true economic destablization of the bottom 50%-75% of the country's population.

 

[whateversa]

Sounds like he is just trying to promote his AI investments... nothing more. How are companies going to have customers if their customers are unemployed and not spending money on anything other than essentials? How will they pay the plumbers and cleaners - who will now be the main source of income in the economy. Even if they made a basic universal income, people like plumbers and cleaners simply wont have to work...

 

[sreams]

Taxes are percentages, not fixed amounts. If individuals make less money, they will naturally pay less in income taxes. If there is more money in capital gains, then the tax revenue from capital gains will increase. You could literally do nothing to change the percentages, and the shift in where revenue comes from would happen anyway.

 

[toooooot]

How will they replace it though?

 

[toooooot]

2 options here:

Universal BASIC Income
OR
Conflict in one form or another, whether that be a revolution, or war.

Your going to ask how it's funded!? Increase taxes on the rich, resources, mining, etc. - people will argue higher taxes but no one on here surely is that rich, c'mon ..and when I say rich, I mean wages exceeding 300$/k AUD /year

I believe there is not much money in resource mining. If it was so profitable, we would use our own land to mind everything it has in it. Also, as I recall from countries like Russia, the salaries in these jobs are not great except for the people with a lot of skill and years of experience. Mining is not the industry that can sustain more taxing