President Donald Trump’s tax and spending bill that’s titled “One Big Beautiful Bill Act,” proposes to put a moratorium on states from regulating artificial intelligence (AI) for 10 years, which has unsurprisingly infuriated state governments as well as policy leaders. Here’s everything we know about the proposal and the consequences if it were to be passed.

Trump’s tax and spending bill has been controversial from the outset and faced a lot of backlash, including from Elon Musk, who until a few days back was among the key advisors to the President, heading his Department of Government Efficiency (DOGE).

The opposition to the bill was mainly about the tax cuts for the wealthy while cutting spending on food assistance and Medicaid, as well as subsidies for the green energy transition. The bill would add $2.4 trillion to the U.S. Federal budget deficit over the next decade, making the country’s financial situation even more precarious.

Trump’s Tax and Spending Bills Call for Curbing States’ Power to Regulate AI

Coming back to the provisions about AI regulations, the bill says that no state “may enforce any law or regulation regulating artificial intelligence models, artificial intelligence systems, or automated decision systems during the 10-year period beginning on the date of the enactment of this Act.”

While the AI regulations are still evolving, some states, including California, New York, and Utah, have enacted their own AI laws. What makes the proposal to bar states from regulating AI even more perplexing is the fact that currently, there are no comprehensive federal AI regulations in the U.S., even as President Trump and his predecessor, Joe Biden, signed executive orders over the same.

Trump’s Executive Order Talked About “Removing Barriers” for AI Development

Biden’s order talked about “Safe, Secure, and Trustworthy Development and Use of Artificial Intelligence” while highlighting the need for the US to remain “competitive in the global economy.” However, Trump’s executive order revoked “certain existing AI policies and directives that act as barriers to American AI innovation, clearing a path for the United States to act decisively to retain global leadership in artificial intelligence.” Trump has generally favored fewer regulations, even as some argue that lax regulations can come back to haunt them later.

AI regulations have been a burning issue not only in the U.S. but also globally. While the technology is expected to enhance productivity and lead to the creation of new jobs and industries, there are also concerns over data privacy and the growing menace of deepfakes using AI tools.

The Debate Over States Regulating Artificial Intelligence

Meanwhile, there are arguments both for and against states having the authority to regulate AI. Firstly, there is still no federal law regulating AI, and the bill seeks to bar states from having their own regulations without providing an alternative. As Anthropic CEO Dario Amodei wrote in an op-ed in the New York Times, “Without a clear plan for a federal response, a moratorium would give us the worst of both worlds — no ability for states to act, and no national policy as a backstop.” State-level regulations can also act as a testing ground and can help address state-specific issues. What makes the provision especially worrisome is that the language suggests that it even bars states from regulating autonomous driving, which is still prone to accidents.

Those batting for curbing the ability of states to regulate AI argue that confusing regulations between different states can impede the pace of AI development in the US at a time when China is fast catching up and is launching low-cost AI models in a flurry. Conflicting regulations between states and a lack of uniform law can stifle innovation at a time when the US needs to maintain its lead over China in AI.

Can the Federal Government Bar States from Regulating AI?

There is also a question mark on whether the federal government can impose such a law, as the tenth amendment states, “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.”

Moreover, the proposal might not withstand the Byrd Rule, which restricts the inclusion of “extraneous” provisions in reconciliation bills like Trump’s tax and spending bill. The rule, however, applies only to the Senate, and the House does not have a similar rule.

The bill has already passed in the House and now needs to get through the Senate. Amid the apparent legal challenges and the vociferous opposition, the Senate Commerce, Science, and Transportation Committee has altered the House text on AI regulations. It now says that states would need to forgo their ability to regulate AI if they want access to federal broadband funding.

Meanwhile, the bill is receiving pushback not only from Democrats from some Republicans as well. Sens. Marsha Blackburn (R-Tenn.) and Josh Hawley (R-Mo.) are among those who have spoken against the provisions. While Hawley said that the moratorium on state AI regulations “better be out,” Blackburn said, “We certainly know that in Tennessee, we need those protections.”

A Matter of Federal Overreach

All said, the moratorium on banning states from enacting AI regulation looks like a blatant case of federal overreach, something which the Republicans have always batted against. The proposal is, however, receiving support from OpenAI, which has been lobbying for a moratorium on state AI laws. The company’s CEO, Sam Altman, who was critical of Trump in his first tenure and donated to Joe Biden’s political committee, is now among the key backers of Trump.

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Altman was among the business leaders who joined Trump on his visit to the Middle East, where multi-billion-dollar AI deals were signed. Altman had then blasted those criticizing those deals as “naïve.” Tech leaders have mostly backed Trump’s policies and have been supporting him financially, leading to allegations of quid pro quo. For instance, on April 13, shortly after meeting the CEO of Nvidia, Jensen Huang, in a $1 million dinner at Mar-a-Lago, Trump exempted tech goods like smartphones and chips from the reciprocal tariffs.

Similarly, many allege that Musk (and his companies) benefited greatly from the billionaire’s association with Trump, and as part of DOGE, he eliminated positions and funding at agencies that were investigating cases against his companies, such as the NLRB. Elon Musk managed to get favorable policies for driverless cars from Trump, which would help aid Tesla’s robotaxi launch.