Artificial intelligence (AI) continues to dominate headlines—not just for its technological leaps, but also for the policies shaping its future. In a major development, a new Republican-backed tax bill, released by the House Energy and Commerce Committee on May 11, 2025, seeks to preempt states from regulating AI models for the next decade. If passed, this bill would prevent state laws governing AI systems, allowing only limited exceptions for measures that simply facilitate or streamline AI development and deployment. Laws attempting to regulate artificial intelligence models, artificial intelligence systems, or automated decisions systems would be disallowed during the 10 year period.
This proposed federal approach aligns with the current administration’s emphasis on AI innovation over regulation, reflecting a belief that a unified, national policy will spur American competitiveness in this rapidly evolving field.
A Patchwork of State Activity
The push for a federal moratorium comes as states have been increasingly active in the AI policy arena. Nearly 700 AI-related bills were considered across the country last year, and 113 were enacted into law. Comprehensive state legislation passed in Colorado and Utah both have an impact on healthcare as does California’s Artificial Intelligence in Healthcare Services Bill AB3030, which requires that any AI-generated communications involving patient clinical information in California healthcare facilities include a disclaimer about the use of generative AI and instructions for contacting a human healthcare provider. As AI technologies become more powerful and pervasive, state lawmakers have been eager to step in—sometimes out of concern for consumer protection, sometimes to ensure ethical development, and sometimes simply to keep pace with technological change.
Would a 10-Year Prohibition Foster Innovation?
Supporters of the proposed moratorium argue that a decade-long prohibition on state-level AI regulation would create a stable environment for innovation. Here are some of the potential advantages:
- Reduced Compliance Costs: Companies wouldn’t have to navigate 50 different regulatory regimes, lowering the barrier to entry for startups and reducing legal uncertainty.
- Global Competitiveness: By prioritizing innovation, the U.S. could maintain its leadership in AI, especially as countries like China and the EU ramp up their own efforts.
However, there are also significant disadvantages to consider:
- Stifling Local Solutions: States often serve as “laboratories of democracy,” experimenting with new approaches that can inform national policy. A moratorium could prevent states from responding to unique local needs or emerging risks.
- Potential for Regulatory Gaps: With AI evolving rapidly, a 10-year freeze could leave critical issues—such as privacy, discrimination, and safety—unaddressed at the state level.
- Public Trust: Without robust safeguards, the public may lose confidence in AI systems, potentially slowing adoption and innovation in the long run.
State-Level Innovation: A Testing Ground for AI Policy
Historically, states have played a vital role in protecting consumers and setting standards as new technologies emerge. From data privacy to environmental protection, state-level action has often paved the way for broader reforms. In the context of AI, states are well-positioned to:
- Respond Quickly: State legislatures can often act faster than Congress, addressing new risks as they arise.
- Tailor Solutions: States can craft policies that reflect local values and concerns, whether that’s disclosing AI’s use in healthcare or ensuring transparency in government use of AI.
- Pilot New Approaches: By experimenting with different regulatory models, states can provide valuable insights into what works—and what doesn’t—before national standards are set.
That said, the rapid pace of AI development and its cross-border impacts do pose challenges for state-level regulation. There’s a real risk of fragmentation, with companies facing conflicting requirements that stifle growth and innovation.
What’s Next?
The debate over AI regulation is far from settled. As Congress considers this sweeping moratorium, policymakers will need to weigh the benefits of a unified national approach against the risks of stifling local innovation and oversight.
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