Token Taxes Threaten AI Growth

Taxing 'tokens' (the units LLMs process) mirrors the 1990s 'bit tax' idea and would impose usage‑proportional costs on AI services, raising prices for companies and end users and incentivizing throttling, avoidance, or offshoring of AI infrastructure. The policy impulse treats digital consumption as a taxable base without accounting for network effects and the fixed‑cost nature of AI buildouts, creating a risk of slowing adoption and innovation. — If enacted, token taxes could materially reshape AI industrial policy, slow productivity gains, and shift where AI capacity and investment locate — affecting growth, competition, and consumers.