ALEC urges states to adopt ‘light-touch’ AI regulation

By Andrew Rice
The Center Square

The American Legislative Exchange Council called on state legislatures to embrace limited tax regulation and greater investment in artificial intelligence to facilitate effective government processes.

The council released its AI policy toolkit calling for a “light-touch” policy approach to AI.

“U.S. regulators risk jeopardizing A.I.’s massive potential and benefits to consumers by stifling this technology in its infancy with inflexible, burdensome regulations,” the report reads.

ALEC found that more than 1,000 AI-related bills were introduced across all 50 states in 2025, with 118 becoming law. ALEC urged lawmakers to use existing laws to address concerns about AI regulation.

“In many cases, the federal government, states and localities already have sufficient laws on the books designed to address fraud or discrimination in a technology-neutral way,” the report reads.

The report outlined the Artificial Intelligence Tax Non-Discrimination Act, a piece of legislation that is meant to prevent states from targeting AI-powered services from state tax measures. The policy would restrict taxes based on computing power and AI subscriptions and would prevent an AI service from being taxed similarly to a phone service.

“Tax policy must remain neutral toward the mode of delivery or technological implementation of services,” the report reads. “It does require any taxes to remain neutral, technology-agnostic, and avoid singling out one industry segment in favor of another.”

The report criticized a New York state law that imposed taxes on businesses for implementing AI to replace human labor.

Jake Morabito, senior director of policy at ALEC, pointed out examples in Texas where AI has been implemented to increase government efficiency. He said Texas found agencies using AI turned two weeks of paperwork processes into a 13 second task.

Additionally, the Texas Department of Transportation used AI to use machine video learning to clear crashes and debris and respond to emergencies.

“States should thoughtfully deploy AI and ensure new regulations are narrowly tailored on specific objectives that improve the lives of constituents,” Morabito said.

He pointed to legislation under former Virginia Gov. Glen Youngkin that regulated AI integration in government and schools.

ALEC also proposed the Right to Compute Act, legislation modeled after a bill passed in Montana. The legislation would require the government to justify any restrictions on AI or emerging technologies it attempted to implement in law.

“Any government restriction on the lawful use of technology must be narrowly tailored and fulfill a compelling government interest,” the report reads. “This approach to technology regulation preserves individual liberties and limits government overreach.”

ALEC said the policy would allow the government to focus on tangible, proven threats in the emergence of new technologies including fraud scams, deepfake content and nuisances caused by physical data center infrastructure.

Additionally, ALEC promoted a Technology-Neutral Anti-Discrimination Clarification Act to prevent AI companies from being discriminated against. The report cited examples of burdensome regulations in Colorado that have prevented AI companies from further developing.

ALEC warned against forcing AI companies to divert resources to comply with governmental regulations and encouraged state lawmakers to use existing laws when incidents arise.

“States can allay the public’s fears of discriminatory or biased AI by focusing on the harmful conduct and bad actors responsible for unlawful discrimination, not the underlying tools used,” the report reads.

ALEC’s report also calls on state legislatures to invest in creating advisory AI offices to assess regulation barriers and oversee programs. The offices would be in charge of managing state regulatory capacity, granting mitigation agreements and establishing a voluntary AI learning laboratory.

“The Office is tasked with identifying regulatory barriers to AI development, cutting regulatory red tape that hinders innovation, and fostering collaboration with the private sector and other states on AI public policy,” the report reads.

ALEC urged state lawmakers to adopt an approach that embraces AI and limits burdensome regulation. The group called on lawmakers to avoid regulating based on “science-fiction narratives” and embrace the possibility of AI innovation.

“Policy makers should keep in mind that, at its core, artificial intelligence is a tool that works to augment humans for the better, not replace them entirely,” the report reads. “Continued human oversight and direction will remain essential for the forseeable future.”