Marketplace - Preparing for an AI tax crisis

Episode Date: August 25, 2026

If artificial intelligence really does replace human labor, the U.S. could be in for a tax revenue crisis. That’s because high unemployment shrinks the pool of taxable wages. In this episode, we visit Akron, Ohio — the former tire capital of the world — to learn what happens when lost jobs snowball into lost government funding. Plus: Economists hope for cake but will settle for crumbs in Fed Chair Warsh’s Jackson Hole Symposium speech, and a new plan for Colorado River drought management draws backlash.Every story has an economic angle. Want some in your inbox? Subscribe to our daily or weekly newsletter.Marketplace is more than a radio show. Check out our original reporting and financial literacy content at marketplace.org — and consider making an investment in our future.Read the stories in today’s episode:Will Fed Chair Warsh actually say anything in his big Friday speech?Two years after Hurricane Helene, Asheville Tea Company finds a new homeWhat Akron's rubber bust can teach us about a possible AI tax crisisThe new Colorado River plan is out, and it's already under fire

It's late summer, which means some very important people in the economy are headed to Jackson Hole. We'll tell you what that means for the rest of us. From American Public Media, this is Marketplace. In Denver, I'm Amy Scott in for Kai Risdahl. It's Tuesday, August 25th. Good to have you with us. Central bankers from around the world are heading to the mountains of Wyoming later this week for the Federal Reserve's annual Jackson Hole Economic Policy. symposium. And the main event is going to be Fed chair Kevin Warsh's speech on Friday. The Fed has often

used the keynote address at these events as a way to forecast its longer-term plans, how officials are thinking about the economy, and their approach to interest rate policy. That said, we've talked a lot on this program about how Warsh is kind of a closed book when it comes to forecasting any of the Fed's plans. Marketplace's Justin Ho has more on what to expect. Economists certainly want to hear from Kevin Warsh on a lot of topics. David Kelly, chief global strategist at J.P. Morgan Asset Management says he wants some clarity on how the Fed's thinking about the economy. How they're thinking about a slowly declining inflation rate, how are they thinking about overall economic growth and the risks on both sides, and ultimately

whether they're okay with the level of interest rates. I'd like to hear that. But Kelly says what he'd like and what he expects are two different things. As an economist, we would like a big slice of cake, but if we don't get a slice of cake, we will look carefully for any crumbs. There could be some crumbs on Friday. Carol A Binder is an economics professor at UT Austin. She's hoping that Chairman Warsh will talk more about some task forces he created earlier this year on inflation, labor markets, and how the Fed measures all that.

One of the task forces is devoted to data. It's supposed to, quote, improve the quality and timeliness of real economic signals that inform the Federal Reserve's policy judgments. Chairman Warsh has said that he thinks the Fed should rely more on private sector data instead of government reports. So Binder says she'd like to know more. When we're trying to think about what the Fed might do next, it's important to know which of those measures do they think are useful. The speech could also give us a better sense of who Kevin Warsh is. Claudia Somm, chief economist at New Century Advisors, says she went back and looked at the first Jackson Hole speeches that previous Fed chairs made. So Ben Bernanke had the very economic history lens.

Janet Yellen, deep dive on the labor market. Jay Powell talked about risk management. Those weren't just topics. They're also their approach to being a Fed chair. And Sam says Warsh could give us something similar. She says it doesn't have to be about the Fed's plans. It could just be about why he's held interest rates steady so far. It's like these are decisions the Fed has made as he has been chair.

Just talk to us about it. Why are you doing that? What date are you looking at? What are you thinking through? Sam says that might not be the speech we get, but it's the speech we deserve. I'm Justin Howe for Marketplace. Wall Street shrugged off the latest salvo in the U.S. Canada trade war. We'll have the details when we do the numbers.

Two years ago next month, Hurricane Helene struck the East Coast, bringing devastation to many states, including North Carolina, where it was the most destructive natural disaster to date. That's how I met Jesse Dean. She's the founder and CEO of Asheville Tea Company, located in Asheville, North Carolina, in the Western Blue Ridge Mountains. Her original building was swept away in the flooding from Helene, and we've been following her recovery ever since. Jesse, good to talk with you again. Hi, Amy. It's so good to talk with you and to be here. So it's been a while since we last spoke. And back then, you were still looking for a new building to make your tea and possibly do retail too. How is that search going? We were looking for a building still last time we spoke. And luckily, we have signed a lease. So that's one of the biggest pieces of news for us. Oh, wow. Congratulations. Tell me about it.

Thanks. Yeah. We have. We looked and looked, and it's tough here because commercial real estate is expensive, and you know, we wanted to find just the right place, too. And eventually we did. It's a beautiful spot really close to downtown Asheville. And we are excited about the retail component, too, because we've wanted to interact with our customers more closely for a really long time. So this space gives us the chance to do that.

So while you were in a temporary space, you've been manufacturing with a partner in Canada. Is that right? That's right. In particular, Sargessa tea in Canada jumped in immediately right after the hurricane. They're another tea company based in Calgary. So we have been working with Sarjessa now for almost two years. They've just been a phenomenal partner. And as I'm sure you know, over the weekend, the trade deal talks between the U.S. and Canada fell apart. Are you caught up at all and the 50% tariffs that took effect on a bunch of goods? So it's been a challenge for us because on the bright side, right now, T still falls under the USMCA agreement. So we're not being specifically tariffed on most of our products coming in and out of Canada. However, it's been

really tricky to kind of constantly reforecast and re-budget and follow the news and try and figure out what's about to hit. So now we're kind of unpacking the news around the 50% tariffs and looking at, okay, do any of the herbs or botanicals fall into different categories that might now be seeing increased costs or tariffs coming from Canada? If those things can shift, they may very well shift for us in the future. That's a lot to try to keep up with at the same time you're trying to recover from a major disaster. Did you end up getting any federal funding to, help you rebuild? We have not yet received federal funding to help us rebuild. There has been progress on that.

You know, fundraising for the past two years has been the biggest part of my job in all possible ways to try and keep our business afloat. I mean, it would be tremendously helpful to have that funding at this point. Wow. And that's almost two years now since the disaster. This stuff takes time. Right. It really does, which, you know, is unfortunate. And that's surprise to me, to be honest, I definitely had hoped we would have been in a space by now. I'm so, so grateful in so many ways for our community and customers and team and the farmers we work with and, you know, so many folks who have helped us get to where we are now and to stay in business over this time. And it continues to be a both-and situation of just,

it really does take a very long time. Well, at this point, it sounds as if you're still recovering from Hurricane Helena. And I don't know if you'll ever consider yourself fully recovered. But how big a deal is it to move into your own space? Does that get you closer to that goal? It absolutely does get us closer. Yeah. So it's a huge deal.

It's really an exciting moment and turning point, I hope, from an impact perspective, which is, I mean, really the whole point of this and what's keeping me motivated all along and through all of these challenges. So crossing this threshold and being able to actually start to work towards getting into a space does feel like a really big step in that direction. I know this must have taken a huge toll on you personally. Has there ever been a moment when you were like ready to throw in the towel? I mean, it's a big question.

For me, I still would say that I have not had a moment where I wanted to throw in the towel. What has driven me to continue to do this work is, really the sense of purpose that I have baked into this company. Like I want to have economic impact in a positive way on our region. I want to support land and farmland conservation and family farms. I want to support our team who we've employed, you know, all through this and figured out ways to keep folks on payroll and to stay together. Like to be able to do that and to connect with our customers with a product and tease that we feel really passionate about is what drives me to continue to do this work, even though personally,

I think in some ways it's taken all this time to stop being in crisis management mode and to start really processing what has happened to us. And so that can feel really heavy at times for sure. And it's something that I think I'll be working through still for some time. All right. Jesse Dean is founder and CEO of the Asheville, T Company in Asheville, North Carolina. Thanks so much and good luck moving into the new space. Thank you so much, Amy. I appreciate it.

Coming up. The biggest challenge is for people to put their bullhorn down? It's harder than you might think. But first, let's do the numbers. The Dow Jones Industrial Average added 160 points, 3 tenths percent to finish at 53,577.

The NASDAQ picked up 171.271.230. of a percent to close at 26,151. And the S&P 500 improved 24 points, 3 tenths percent, ending at 76-77. In the ongoing trade fight with the U.S., Canada responded today with retaliatory tariffs on about $20 billion of U.S. goods, including things like steel and aluminum. Investors saw some opportunity. New Corps, a Charlotte, North Carolina-based steel producer, saw a one-and-two-tenth-percent bump on the news.

Steel Dynamics out of Fort Wayne, Indiana picked up 8 tenths percent, and aluminum producer Alcoa gained 3 and 8 tenths. Bonds rose. The yield on the 10-year T-note fell to 4.62%. You're listening to Marketplace. This is Marketplace. I'm Amy Scott. So very much about our AI future is up in the air, but nearly everyone agrees we are in for an era of massive workplace disruption. That would be true even if the AI revolution. ultimately leads to a more prosperous, healthier society. And guess what happens when new technology throws lots of us out of work or into lower-paying jobs? Less income means less income tax, which could squeeze government budgets. Marketplace's senior correspondent for future effects, David Brancaccio,

has a series this week called Robots, Eat My Taxes. Here's David. 1200 firestone parkway Akron, Ohio, where beneath the imposing clock tower of what was once, Firestone Tire Company Plant No. 1, where a pile of debris now lies moldering at our feet. The city this spring decided to save, at least the clock bit. It's part of the identity of a city. A city that's been through hard times,

where's its scars, if not with pride, with meaning? University of Akron Professor David Giffles is co-author of the book Wheels of Four. fortune, the story of rubber in Akron. Not just Firestone, but Goody, General, Goodrich, Bridgestone, all here. By 1950, half of all vehicle tires on planet Earth were made here in Akron, but by 1982, tires had hit the skids. It was when proud Akron realized we're not the rubber capital anymore. It was the year they peeled the very last passenger car tire from a mold in Akron. The job loss had been massive. The city's finances plummeted.

The city had to cut. 600 jobs had to eliminate 200 cars from the motor pool. Had to borrow $13 million to keep the recycle energy plant going, to keep the lights on. It was brutal. What does this have to do with artificial intelligence and tax? This city is a case study of what happens when new technology clobber's jobs, clobbers income, which then clobber's tax revenue. Here in Akron 40-some years ago, the new technology killing jobs was the steel-belted radial tire,

a European innovation that lasts longer and saves gas, yet Akron factories were customized to build the old school tires, and company brass just kept wishing the longer-lasting tires would go away. In our book, there's a Firestone executive who just says flatly, the radial tire is the reason that rubber left Akron. Could AI do to our near future what radial tires did? to Akron, tax policy experts are now planning for many scenarios, but some include an intense period of human layoffs, as software increasingly does what one economist called human-shaped work. Lee Lockwood is a University of Virginia economics professor. If labor displacement does become widespread and the labor share in the longer term goes way down

as labor share of income, these would be really problematic for our current tax system. And the way we collect taxes makes us a special. vulnerable. Most rich country governments, including the U.S., rely very heavily on labor taxation for much of their revenue. For the federal government, two-thirds is from taxing labor, more than taxing corporations, more than taxing investments when they go up. The old tax system won't work without reform. That's Nobel Prize winner Joseph Stiglitz, now at Columbia. While multiple experts worry it'll take a crisis to overhaul an entrenched system, the solutions to a possible government revenue mess

triggered by AI are varied and interesting. Maybe taxing units of AI, maybe the government takes loads of AI company's stock and profits when it goes up, a national sales tax, anyone? Or something we do already, but could try more of it. Forced the corporations to pay their fair share. University of Virginia's Lockwood co-authored a piece for Brookings that encourages policymakers to start weighing the alternatives.

He's among the many who say a great place to start would be to fix the national debt, so the U.S. would have more leeway to respond to AI workplace disruption through government borrowing. Chances Republicans and Democrats would unite in this political environment? Well, now they can't say they never heard this coming. In Akron, I'm David Brancaccio for Marketplace. David is our senior correspondent for future effects. All this week, we'll be looking at solutions to the... AI tax problem on this program and the Marketplace Morning Report. And you can watch our videos at Marketplace APM on

YouTube and Instagram. We talked yesterday on the show about how the city of Denver is coping with less water in the midst of extreme drought. Throughout the west, the states and tribal nations that rely on the Colorado River are absorbing a new federal plan for sharing that depleted resource after years of negotiations between the states failed to produce an agreement. Under the final rules announced last Friday, California, Nevada, and Arizona, the states in what's called the lower basin, will have to reduce the water they take from the river by 20 percent over the next two years, and possibly much more after that, while the upper basin states, Colorado, Utah, New Mexico, and Wyoming face no mandatory cuts. On Monday, the state of Nevada sued the Trump administration,

over what it calls an unfair burden. In order to get some perspective on this plan, we gave Pat Mulroy a call. She was the first ever general manager of the Southern Nevada Water Authority, and she continues to consult on water-related issues today. I spoke with her yesterday before news of the lawsuit. Good to talk with you again, Pat.

Glad to be here, Amy. So at long last, we have a plan, at least for the next two years, governing the Colorado River. What's your take on the official guidelines that were announced on Friday? Well, I'm not going to overreact to them. I think essentially they are what the lower basin

submitted to interior. A series of cutbacks over the course of the next two years. This year definitely, next year if hydrology dictates it, and it goes no further than that. I don't think you can go beyond two years at this point. too many uncertainties. The secretary has no authority in the upper basin when it comes to forcing reductions in use. So he did the only thing he could, which was encouraged them to voluntarily cut back an additional 200,000 acre feet, which at the end of the day is probably

in their best interest if they can do it in a painless manner. So the threatened cuts were going to be much higher, up to 40% of the waterline for the lower basin states. I don't listen to threats. Seriously. I'm taking this one step at a time. I think if we're going to put our energies anywhere in the interim looking beyond the two years, it's in finding ways to augment the river system. Find ways to add water to the system because you can't cut your way out of this. Well, and you know a lot about that. I mean, you really turn. Las Vegas into a poster child for conservation. But not every state has been as aggressive. I mean, do you see more room for conservation as we also pursue new supplies of water? Well, of course,

there's always opportunities for conservation, but I've become very careful of pointing the finger at my neighbors. I think a lot has been going on in California in terms of conservation. Southern California's urban area has a greatly diversified supply. It not only takes water from the Colorado River, it has an abundance of groundwater supplies, and it brings water in from the Bay Delta, not to mention that areas like San Diego have now supplemented their supply with ocean decal and aggressive recycling. So I think they've been doing conservation. I think we love sitting here and pointing the finger at others and saying, we have a problem and you have to fix it. Looking beyond the next two years, as you said, a lot depends on conditions, meteorological

conditions and use and how much we're able to conserve. But are you confident that the Southwest can continue to grow with such a threatened source of water? Let's not go there. I mean, the only reason if we were to really run a quote unquote out of water, it'd be our own fault. I mean, one of us is sitting right next to the Pacific Ocean. We have limitless opportunities for ocean desal. There are a plethora of opportunities in the lower basin. We just have to develop the intestinal fortitude to pursue them. I think before we go make these wonderful statements,

and they're usually by people who just moved in in the last 15 minutes, we need to just take a deep breath and look at what the alternatives are. I mean, I've lived here for 52 years. I can't get excited about growth. Other than desalination, what solutions or innovations do you see that you think could be promising for the region? Well, I think metropolitan's already begun one of those pathways. The communities in California have been sending their wastewater to the ocean.

If you recapture that and you recycle it the way Nevada does, 93% of all our wastewater is recycled, that is a opportunity. I mean, that's the secret to climate change, is you're not going to have a straight line supply equation. You're not going to use the same source of supply every year. You have to have maximum diversity in your portfolio, maximum cooperation with your neighbors, and look at any and all opportunities, and when you have the water there, store it somewhere for use during the more difficult times. You've been in the room for these negotiations in the past.

What is often the biggest challenge in getting everybody on the same page? The biggest challenge is for people to put their bullhorn down and try and seek to understand what the pinches, points are for the person across the table or for the state across the table. The notion that one state will survive while another crater is counterintuitive and it doesn't lead to any kind of productive solution. And the worst thing is when we start talking about, you know, these great legal theories that legal scholars are coming up with, I want to tear my hair out. We need to be as pragmatic as we possibly can. Put the damn law books aside.

they're not going to solve the problem. I wonder what they're doing without Pat Mulroy in the room. Do you have a successor who says forceful? I think this is a due generation, and they're coming at it in a different way. Look, I'm kind of this strange character that has this horrible habit of saying, okay, here's the skunk. I'm going to put the skunk in the middle of the table, and we're going to deal with the skunk,

and we're not going to dance around the skunk. So I'm sure there are. I'm sure there are people in the room that are equally pragmatic. But every time I pick up the paper and I read about potential lawsuits, I just want to scream. It's not going to work. All right. Pat Mulroy was the longtime general manager of the Southern Nevada Water Authority.

Thank you so much for your time. You're very welcome, Amy. You can hear more about climate solutions, including the story of how Pat Mulroy transformed water use in Las Vegas on the podcast I host. Just search for how we survive. This final note on the way out today,

a few numbers in honor of Dolly Parton, who died today at the age of 80. 3,000 plus. That's the number of songs she wrote over her nearly seven-decade career. 25 is how many number one hits she had on Billboard's Hot Country Songs chart. She retained ownership of the publishing rights and invested much of her wealth in philanthropy,

which brings me to $332 million. That's the number of free books distributed through her imagination library to young children since 1995. And finally, $1.8 billion, the estimated annual economic impact of Dollywood, the theme park Dolly Parton co-owned in Pigeon Ford, Tennessee, A true legend. Jordan Manj, Zoniel Maharaj, Janet Wyn, Olga Oxman, and Virginia K. Smith are the digital team. I'm Amy Scott. Hope to see you back here tomorrow. This is APN.