AI and taxes: How Trump's 'big, beautiful bill' could reshape the global tech landscape

Spending bill would curtail AI regulation in the US

If Donald Trump's 'big, beautiful' bill is signed into law, it could significantly affect AI regulation in the US and the race for AI dominance around the world. Bloomberg

Although President Donald Trump's much touted "big, beautiful bill" largely revolves around tax cuts – particularly for the wealthiest Americans – it could also shape artificial intelligence developments for decades to come.

Tucked into the legislation that has already passed the House of Representatives but still needs approval from the Senate is a provision that would limit the ability of all 50 US states to enact laws that regulate AI, at least temporarily.

Initially with the tax bill endorsed by Mr Trump, states would be unable to obtain federal funding for various projects provided in the legislation if they passed any laws limiting AI in the next 10 years.

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That timeframe was later lowered to five years, but anger about the provision remained.

It's not unusual for large tax and spending bills to include parts that might seem unrelated to the central intent of the legislation, but the AI provision has sparked backlash from both sides of the aisle.

According to law firm BCLP, the absense of a country-wide AI regulatory framework in the US has created a patchwork of AI laws passed and proposed by various states.

“Make no mistake, we can have an AI revolution while also protecting the civil rights and liberties of everyday Americans," said Massachusetts Democratic Senator Edward Markey several weeks ago, blasting the provision that limits the rights of states to regulate AI.

Far-right Congresswoman Marjorie Taylor Greene has also spoken against the inclusion of AI stipulations in the proposed tax bill, saying that it unnecessarily burdens rural and conservative leaning parts of the country by potentially penalising them for enacting AI laws.

She pointed out in a post on X that 40 state attorneys general had written a letter to Congress against the proposal.

"It’s not too late for the Senate to take it out," she added.

According to the Cato Institute, as of 2024, at least 40 states had considered and at least 31 have passed various forms of laws to put guardrails on AI.

Yet during his 2024 campaign for the presidency, Mr Trump came out swinging against what he saw as onerous AI regulations.

"We will repeal Joe Biden’s dangerous Executive Order that hinders AI Innovation, and imposes Radical Leftwing ideas on the development of this technology," the official 2024 Republican National Convention platform, largely composed by Trump campaign staffers, read.

"In its place, Republicans support AI Development rooted in free speech and human flourishing."

The proposal has likely been met with applause from various US technology majors as they pump billions into AI development to try to dominate what has already become a lucrative market.

Yet public officials, labour groups and even some proponents of the technology have expressed concern over the potential for AI to cause unemployment, create user data security problems and prompt an energy crunch.

Those anxieties have led to regulations passed at a local level to try to blunt any inadvertent impacts of AI.

Many in Silicon Valley, however, remain concerned that if regulations become too burdensome, the US could lose its competitive advantage in the AI space to China and other countries deemed adversarial.

The increasingly adversarial relationship between China and the US has influence the overall race for AI dominance.

To some extent, these concerns about regulation have already been acted on by the Trump White House as it seeks to ease AI chip export policies enacted by the Biden administration.

If Mr Trump's "big, beautiful bill" passes with the current AI stipulations in place, proponents say it will guarantee US dominance in the AI sector and create a cascade effect where US technology is used for the technology's implementation around the world, potentially creating more allies and wealth.

"This isn't federal overreach," said Neil Chilson, former chief technologist for the Federal Trade Commission during the first Trump administration and current head of AI policy at the Abundance Institute, a non-profit organisation that supports emerging technologies.

"It is a pragmatic, limited measure to slow the patchwork quilt of fifty state AI laws from becoming a wet blanket on federal legislation."

However not all tech entrepreneurs are on board with limiting local and state ability to enact AI regulations.

"A 10-year moratorium is far too blunt an instrument," wrote Anthropic chief executive Dario Amodei in an opinion piece for the New York Times.

"Without a clear plan for a federal response, a moratorium would give us the worst of both worlds – no ability for states to act, and no national policy as a backstop." He added that local legislation often seeks to identify the dangers of AI and help fix it, therefore improving it in the long run.

Mr Amodei, who is also a proponent of the technology export controls enacted by the Biden White House, recently warned that the fast-development of AI could "wipe out half of all entry-level white-collar jobs".

While Mr Amodei is in the minority among tech entrepreneurs, he is finding allies among media activism organisations like Common Sense, which describes itself as being "dedicated to improving the lives of kids and families by providing the trustworthy information".

The group said that more than 60,000 people have signed a petition to protect states' rights to pass AI laws.

"Senators should pay careful attention to the rising discontent over the proposed 10-year ban on AI safety laws and should strip it from the budget bill," said James Steyer, chief executive of Common Sense.

"Banning state AI safety laws is not a budget matter and has no place in a budget bill." He described the 10-year-ban as "irresponsible and indefensible", in terms of how it leaves consumers and children "vulnerable to AI threats".

The "big, beautiful bill" is still awaiting a vote in the Senate, and Republican leaders have said they are aiming to have it on the President's desk by Independence Day on July 4.