Summary#
A-5676, as introduced, would create a 10% tax on certain computer processing used for artificial intelligence systems. It would also establish a fund in the Department of Labor and Workforce Development, supplementing Titles 34 and 54 of New Jersey’s laws. The bill’s stated goal is to support workers displaced by AI as they move to other careers. It has been referred to an Assembly committee and is not law.
- AI processors would pay the tax on the value of covered processing. For contracted processors, the bill calculates that value using tokens and the processor’s rate; for processors owned and operated by an AI business, the Division of Taxation would approve the calculation method.
- A processor located in New Jersey would be taxed on covered processing it performs. An out-of-state processor would be taxed for processing used by a qualifying AI business, with the tax apportioned to the share attributable to business uses in New Jersey.
- Processors and qualifying AI businesses would have to keep records and provide them to the Division of Taxation as required.
- Tax revenue and other deposits would go into a non-lapsing fund managed and invested by the State Treasurer. Spending would be subject to legislative appropriation.
- The Department of Labor and Workforce Development could use appropriated money for worker training, grants to organizations, and student support services and dual-enrollment programs in public high schools. The State Employment and Training Commission would evaluate the training services annually.
What it means for you#
- AI processors: You would owe the tax if your processing meets the bill’s rules. The bill lets a person responsible for the tax collect it from a customer as though it were part of the purchase price; the processor, not the customer, is named as the taxpayer.
- AI businesses using the processing: You would have to keep and provide records, even if you do not owe the tax as the processor. The bill defines covered AI systems to include systems that materially influence or replace human judgment in a job function, and excludes general-purpose software, standard databases, and basic non-learning automation.
- Workers: The bill defines a displaced worker as someone whose job ends, or is expected to become obsolete within 12 months, because of AI. It does not itself guarantee a worker a benefit or training place.
- Public high school students: Fund spending may support student services and dual-enrollment programs, but the bill does not require a particular program or student benefit.
- Other taxpayers: The bill does not create a direct tax on individual workers or households.
Money#
No cost or revenue estimate is provided in the supplied material; no publicly available information on those estimates is included.
- The tax rate is 10% of the value generated by covered processing, as calculated under the bill.
- Tax receipts, investment returns, and other money made available to the department would be credited to the fund. Fund spending requires legislative appropriation.
- Department administrative costs are capped at 10% of fund revenue deposited in a fiscal year, with an exception for first-year start-up costs approved by the Director of the Office of Management and Budget. Commission costs are capped at 0.5%.
- Processors and AI businesses would incur recordkeeping and reporting duties. Their costs are not estimated.
What is unclear#
- The Division of Taxation must set rules for tax calculations and records. The bill does not provide all calculation details, including the method for controlled processors; the division would approve that method.
- The bill does not define how to determine whether a job became obsolete “due to” AI, or how to assess a worker’s expected job loss.
- The Labor Department must set the nature and duration of support and standards for identifying displaced workers. Specific eligibility, application, and appeal rules are not in the bill.
- The bill does not guarantee how much money will be appropriated or how many workers or students will receive support.
- The supplied material does not include the existing laws the bill supplements, so current-law requirements and overlap with existing programs could not be verified.
Case for#
- The bill appears intended to raise money from AI processing for worker transition support, linking a new revenue source to costs the bill identifies.
- Funding career selection and training could help eligible workers prepare for other careers.
- Annual evaluation and public reporting could provide information about spending, services, and reemployment.
- The bill allows grants to qualified organizations, which could deliver training and related services.
Case against#
- The tax base depends on token counts and rates, and the bill leaves important calculation details to later rules. That could make the tax harder to estimate and administer.
- The bill requires records from both processors and AI businesses, including information about processing and its business use in New Jersey. Their compliance costs are unknown.
- Workers would not have a guaranteed benefit: support details depend on later rules, and spending depends on legislative appropriation.
- The bill does not specify how the tax’s cost would be divided between processors and their customers; it allows the tax to be collected from a customer.