Should Robots Pay Taxes? Tax Policy in the Age of Automation

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Date
2017
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Harvard University. Text held by University of Surrey, SRI (Surrey Research Insight) in an Institutional Repository Republished in: Economic Law Review (Chinese)
Abstract
Abstract: Existing technologies can already automate most work functions, and the cost of these technologies is decreasing at a time when human labor costs are increasing. This, combined with ongoing advances in computing, artificial intelligence, and robotics, has led experts to predict that automation will lead to significant job losses and worsening income inequality. Policy makers are actively debating how to deal with these problems, with most proposals focusing on investing in education to train workers in new job types, or investing in social benefits to distribute the gains of automation. The importance of tax policy has been neglected in this debate, which is unfortunate because such policies are critically important. The tax system incentivizes automation even in cases where it is not otherwise efficient. That is because the vast majority of tax revenue is now derived from labor income, so firms avoid taxes by eliminating employees. More importantly, when a machine replaces a person, the government loses a substantial amount of tax revenue— potentially trillions of dollars a year in the aggregate. All of this is the unintended result of a system designed to tax labor rather than capital. Such a system no longer works once the labor is capital. Robots are not good taxpayers. We argue that existing tax policies must be changed. The system should be at least “neutral” as between robot and human workers, and automation should not be allowed to reduce tax revenue. This could be achieved by disallowing corporate tax deductions for automated workers, creating an “automation tax” which mirrors existing unemployment schemes, granting offsetting tax preferences for human workers, levying a corporate self-employment tax, or increasing the corporate tax rate. We argue the ideal solution may be a combination of these proposals.
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Keywords
artificial intelligence, AI, automation, tax policy, tax system incentive, tax revenue loss to AI, automation tax
Citation
Should Robots Pay Taxes? Tax Policy in the Age of Automation, 12 Harvard Law & Policy Rev. 145 (Abbott) (2017) (W&L top 50) (α). Held by Universersity of Surrey, SRI (Surrey Research Insight).
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Copyright 2017 The Author(s). Reproduced with permission
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Article