Some Texas lawmakers insist that a small business carveout in HB 1709, called the Texas Responsible AI Governance Act (TRAIGA), will shield fledgling businesses from its Euro-style micromanagement of artificial intelligence.
They are mistaken.
TRAIGA is a sweeping attempt to regulate AI under the pretext of preventing algorithmic bias. In reality, it imposes excessive compliance burdens that stifle innovation, particularly among small businesses. It forces AI developers, distributors, and deployers to jump through bureaucratic hoops of paperwork, audits, and impact assessments.
The bill’s so-called small business exemption – for firms earning less than $7.5 million annually – ignores how AI works in the real economy. Most small businesses rely on AI tools developed by larger firms – and even use those tools to compete against them. Since those companies must comply with TRAIGA’s mandates, they will pass compliance costs down the supply chain, increasing expenses for everyone and depriving small businesses of a tool they can use to stay competitive against larger businesses.
A recent U.S. Chamber of Commerce report found that a quarter of small businesses in America already use AI to stay competitive. Whether it’s automated resume screening for construction, bid writing for utilities, AI-driven medical scheduling, or even simple Excel functions, TRAIGA could place everyday AI applications under costly regulatory scrutiny.
TRAIGA’s compliance burdens will discourage AI adoption among smaller firms, widening the gap between startups and entrenched players. Some lawmakers may justify this by arguing that it only targets “Big Tech,” but the reality is different: When large AI firms are overregulated, small businesses that rely on them suffer.
Texas is at the center of the AI revolution. Major AI infrastructure investments from firms like OpenAI, Oracle, and Microsoft bring advanced computational tools to startups and entrepreneurs. The Stargate initiative, backed by SoftBank and OpenAI, is expected to drive AI infrastructure development nationwide – starting in Abilene, Texas.
TRAIGA threatens to undermine this momentum. If passed, the bill will limit access to companies’ AI tools, increase costs to cover compliance, or abandon Texas altogether. Worse, the bill’s vague and subjective language will create a chilling effect, causing businesses to avoid investing in AI out of fear of regulatory entanglement.
California attempted a similar approach, and it backfired. The state’s AI bill was so convoluted and anti-innovation that even some of the most AI-hostile legislators had to backtrack. TRAIGA follows that same failed progressive model by punishing businesses not for actual harm but for hypothetical future harm – a dangerous “guilty until proven innocent” framework.
Fortunately, there is a better path forward. Instead of suffocating Texas businesses with excessive regulation, the Texas AI Freedom Act (TAIFA) will ensure that AI innovation thrives.
Filed by Rep. Brian Harrison, TAIFA takes the opposite approach of TRAIGA – it removes bureaucratic roadblocks and unleashes the power of the free market.
Unlike TRAIGA, which burdens small businesses, TAIFA cuts red tape and fosters AI development by creating a temporary AI Advisory Council to identify and remove unnecessary regulations. It also focuses AI policy on performance and American ingenuity by establishing regulatory laboratories where businesses can test AI innovations in a free-market setting. Notably, the TAIFA alternative ensures the government does not use AI expansion as an excuse to grow its power.
The U.S. is in the middle of an AI revolution, and Texas should lead it. TRAIGA would cripple AI growth in Texas, pushing investment to states with less burdensome policies. Worse, it could open the AI battlefield for China and other adversaries to dominate.
Texas should not follow California’s failed example of overregulation. Instead, it must embrace policies that encourage innovation, competition, and entrepreneurship. The Texas AI Freedom Act does precisely that.
TRAIGA shackles AI innovation. TAIFA unleashes it. Texas lawmakers must choose wisely.
