AI could shift tax pressure toward Bitcoin as labor income loses ground, Carter says

AI could increase pressure to tax Bitcoin wealth and unrealized gains as more income flows to capital owners, according to Nick Carter. He argued that a shrinking labor share of income could strain governments that rely heavily on taxing work to finance welfare spending.

In an October 27 interview with Natalie Brunell, the Castle Island Ventures partner said Bitcoin could fall within broader efforts in the West to tax assets while they are held. Carter suggested that AI could accelerate that shift, making capital taxation an issue Bitcoin holders may face over the next decade.

Carter described the US income split as roughly 70% labor and 30% capital, with government funding also heavily dependent on taxes on labor. If AI allows businesses to operate with fewer employees and labor’s share falls from 70% to 60%, governments could seek more revenue from capital. He presented that change as an illustration of the fiscal mechanism, rather than a firm forecast.

Capital mobility could make that adjustment difficult, Carter said. Investors and entrepreneurs can move to jurisdictions offering more favorable treatment, while Bitcoin makes moving wealth easier. Competition among countries to attract entrepreneurs could further weaken governments’ ability to tax a capital base they assume will remain within their borders.

As an example, Carter discussed California’s proposed 5% wealth tax on billionaires. Citing a paper by two Stanford economists, he said at least roughly 35% of the billionaire taxable base had left the state within a short period before the proposal passed. Supporters had expected about $100 billion in one-time revenue, but Carter said the researchers estimated that the loss of future tax payments from departing residents could leave the state’s finances worse off overall. He stressed that this was an estimate, with the eventual outcome still uncertain.

Carter also argued that AI could deepen generational tensions over wealth. Younger people primarily have labor to sell, while older people tend to hold more capital, he said. Strengthening capital owners’ position could widen that divide as a smaller younger population supports a growing older population, leaving younger workers with less confidence that they will receive comparable pension benefits.

Those pressures could force difficult choices over welfare spending, Carter said, including higher pension eligibility ages or substantial changes to immigration policy. He acknowledged the argument that AI-driven productivity growth could improve public finances, but cautioned that governments could still increase spending faster than their expanding resources.