Don’t Fight the Robots. Tax Them.

Author: Eduardo Porter / Source: New York Times

Andy Rementer

When Bill Gates floated the idea of imposing a tax on robots a couple of years ago, Lawrence Summers, a former top economic adviser to President Barack Obama, called the Microsoft co-founder “profoundly misguided.” How do you even define a robot to tax it?

And taxing innovation is a sure way to make a country poorer. Europe has also rejected the idea. In 2017 the European Parliament soundly defeated a draft motion, proposed by its committee on legal affairs, that recommended considering a tax on the owners of robots to fund retraining programs for workers displaced by the machines and shore up the finances of their social security system.

And yet properly constructed, a tax on automation may not be as destructive as it sounds. South Korea, the most robotized country in the world, instituted a robot tax of sorts in 2018 when it reduced the tax deduction on business investments in automation.

There are two sound arguments for taxing robots. The easiest is this: Governments need the money. In the United States, income taxes account for half of the $3 trillion collected every year by the Internal Revenue Service; payroll taxes account for another third.

Imagine that the fears about robots taking over jobs actually come true. Two years ago, the McKinsey Global Institute found that the job functions that are “most susceptible to automation” in the United States account for 51 percent of the activities in the economy and $2.7 trillion worth of wages. The institute estimates “half of today’s work activities could be automated by 2055.” If that happens, hundreds of billions of tax dollars would be lost every year.

And at the same time that the rise of robots shrinks government tax revenue, the fallout from automation will place more demands on government services. The United States will probably need more money to retrain workers bumped from their jobs by automation, to give them a shot at a new one. Welfare rolls could grow, as millions of workers are displaced to the bottom end of the service economy, where wages are low and robots are scarce.

To afford any kind of government services in the robot era, governments will have to find something else to tax. Why not the robots themselves?

The case for taxing robots is stronger when you consider that a lot of automation these days is not deployed to enhance economic productivity. Instead, many businesses are investing in automation simply because the tax code is urging them to do so.

The purpose of taxing robots is not simply to stop them from killing jobs. It is to level the playing field, to ensure that investments in automation raise productivity.

“The tax system incentivizes automation even…

Click here to read more

The post Don’t Fight the Robots. Tax Them. appeared first on FeedBox.