Before chasing quick fixes for the AI tax problem, look at Chicago's parking meters

During the Great Recession, Chicago decided to sell off its parking meters to raise tax revenue.

"The idea that $20 million annual revenue from meters could be turned into, all of a sudden, more than a billion dollars, struck many people as almost an act of financial alchemy, that they'd turn something basically worthless into something worth quite a lot," said Henry Grabar, author of "Paved Paradise: How Parking Explains the World."

Chicago opted to sell its parking meter rights to a consortium of investors put together by Wall Street called Chicago Parking Meters LLC. It was a $1.15 billion deal to last 75 years.

"Money now is very attractive and, politically, is more popular than money later," Grabar said.

Of course, the new private owners did just what you'd think: They raised the rates for parking in Chicago.

"Parking is something that people deal with every day," Grabar said. "That's one of the reasons that this immediately hit a nerve."

Eighteen years on, Chicago is still having trouble buying the meters back.

Some economists believe now is the time to rethink our tax system for the coming era when untaxed artificial intelligence could replace taxed human workers. But Chicago's experience is a reminder to watch out for unintended consequences when looking for new money.

One approach being pushed by some Silicon Valley luminaries calls for the government to take a bunch of AI company stock and turn it into a (potentially) huge public investment fund. If AI profits shoot up, the fund blossoms, generating lots of money. Venture capitalist Vinod Khosla, speaking at TechCrunch Disrupt 2025, argued an AI sovereign wealth fund might be just the ticket.

"I'll get critique for this idea … but sharing the wealth of AI is a really, really big need, to level the benefits for everybody,” he said. “We won't need to do it in 15 years, but we do have to take care of those people.”

More than two-thirds of U.S. workers support this idea of putting half the stock of AI firms into a fund to benefit society, according to a poll conducted this summer by the research firm Verasight. Senator Bernie Sanders supports the idea, and President Trump has spoken of AI giving back, saying, "If we do that, the public will become very rich."

Tech companies may be worried about how to pay to help people navigate AI disruption, but there could be other motives at play. Nobel laureate and Columbia economist Joseph Stiglitz is skeptical of this approach.

"Once the government is the partial owner of AI, the pressure will be on not to regulate," Stiglitz said. "They'll say, 'Oh, regulation will take away our profits,' and so they're trying to get the government into the mindset of an owner."

Critics say that’s effectively what Norway has done with its massive sovereign wealth fund, built out of its oil and gas profits. An analysis by an environmental group finds Norway is still pursuing fossil fuel exploration and doesn't lean hard on the companies it holds in its fund to curb climate change, despite the country’s commitments to curbing climate change.

Some experts propose a more straightforward approach: Instead of a government fund full of AI stock, why not instead redouble efforts to tax corporate profits, any profits?

“Isn't it better for government to be government, tax and regulate, and then whoever wins, whoever loses, doesn't matter to us, right? I mean, we get the revenue anyway,” said Bruce Schneier, security technologist at Harvard’s Kennedy School and author of “Rewiring Democracy: How AI Will Transform our Politics, Government and Citizenship.”

The argument is pretty simple: no one knows just which companies will really score with AI, so tax them all.

Additional production support by David Shin and Sophie Bellwoar.