Social Europe

politics, economy and employment & labour

  • Themes
    • European digital sphere
    • Recovery and resilience
  • Publications
    • Books
    • Dossiers
    • Occasional Papers
    • Research Essays
    • Brexit Paper Series
  • Podcast
  • Videos
  • Newsletter

Taxing The Robots?

Robert Shiller 30th March 2017

Robert Shiller

Robert J Shiller

The idea of a tax on robots was raised last May in a draft report to the European Parliament prepared by MEP Mady Delvaux from the Committee on Legal Affairs. Emphasizing how robots could boost inequality, the report proposed that there might be a “need to introduce corporate reporting requirements on the extent and proportion of the contribution of robotics and AI to the economic results of a company for the purpose of taxation and social security contributions.”

The public reaction to Delvaux’s proposal has been overwhelmingly negative, with the notable exception of Bill Gates, who endorsed it. But we should not dismiss the idea out of hand. In just the past year, we have seen the proliferation of devices such as Google Home and Amazon Echo Dot (Alexa), which replace some aspects of household help. Likewise, the Delphi and nuTonomy driverless taxi services in Singapore have started to replace taxi drivers. And Doordash, which uses Starship Technologies miniature self-driving vehicles, is replacing restaurant delivery people.

If these and other labor-displacing innovations succeed, surely calls to tax them will grow more frequent, owing to the human problems that arise when people lose their jobs – often jobs with which they closely identify, and for which they may have spent years preparing. Optimists point out that there have always been new jobs for people replaced by technology; but, as the robot revolution accelerates, doubts about how well this will work out continue to grow. A tax on robots, its advocates hope, might slow down the process, at least temporarily, and provide revenues to finance adjustment, like retraining programs for displaced workers.

Such programs may be as essential as our work is to healthy human life as we know it. In his book Rewarding Work, Edmund S. Phelps emphasized the fundamental importance of maintaining a “place in society – a calling.” When many people are no longer able to find work to support a family, troubling consequences ensue, and, as Phelps stresses, “the functioning of the entire community may be impaired.” In other words, there are externalities to robotization that justify some government intervention.

Critics of a robot tax have emphasized that the ambiguity of the term “robot” makes defining the tax base difficult. The critics also stress the new robotics’ enormous, undeniable benefits to productivity growth.

But let’s not rule out so quickly at least modest robot taxes during the transition to a different world of work. Such a tax should be part of a broader plan to manage the consequences of the robotics revolution.

All taxes, except a “lump-sum tax,” introduce distortions in the economy. But no government can impose a lump-sum tax – the same amount for everyone regardless of their income or expenditures – because it would fall heaviest on those with less income, and it would grind the poor, who might be unable to pay it at all. So taxes have to be related to some activity indicative of ability to pay taxes, and whatever activity it is will be discouraged as a result.

Frank Ramsey published a classic paper in 1927 arguing that to minimize taxation-induced distortions, one should tax all activities, and he proposed how to set tax rates. His abstract theory has never been a fully operational principle for actual tax rates, but it provides a powerful argument against presuming that the tax should be zero for all but a few activities, or that all activities should be taxed at the same rate.

Activities that create externalities might have a higher tax rate than Ramsey would have proposed. For example, taxes on alcoholic beverages are widespread. Alcoholism is a major social problem. It destroys marriages, families, and lives. From 1920 to 1933, the United States tried a much harsher market intervention: outright prohibition of alcoholic beverages. But it turned out to be impossible to eliminate alcohol consumption. The alcohol tax that accompanied the end of Prohibition was a milder form of discouragement.

Discussion of a robot tax should consider what alternative we have to deal with rising inequality. It would be natural to consider a more progressive income tax and a “basic income.” But, these measures do not have widespread popular support. If support is not widespread, the tax, even if imposed, will not last.

When taxes on high incomes are raised, usually in wartime, it turns out to be only temporary. Ultimately, it seems natural to most people that taxing successful people to benefit unsuccessful people is demeaning to the latter, and even the recipients of the handout often do not really want it. Politicians know that: they usually do not campaign on proposals to confiscate high incomes and pad low incomes.

So, taxes must be reframed to remedy income inequality induced by robotization. It may be more politically acceptable, and thus sustainable, to tax the robots rather than just the high-income people. And while this would not tax individual human success, as income taxes do, it might in fact imply somewhat higher taxes on higher incomes, if high incomes are earned in activities that involve replacing humans with robots.

A moderate tax on robots, even a temporary tax that merely slows the adoption of disruptive technology, seems a natural component of a policy to address rising inequality. Revenue could be targeted toward wage insurance, to help people replaced by new technology make the transition to a different career. This would accord with our natural sense of justice, and thus be likely to endure.

Copyright: Project Syndicate 2017. This contribution is part of our project on the future of work and the digital revolution.

Robert Shiller

Robert Shiller, Professor of Economics at Yale University and Chief Economist at MacroMarkets LLC, is co-author, with George Akerlof, of Animal Spirits: How Human Psychology Drives the Economy and Why It Matters for Global Capitalism.

Home ・ Politics ・ Taxing The Robots?

Most Popular Posts

Boris Johnson, Brexit, Conservative,conservatism Boris Johnson: blustering onPaul Mason
deglobalisation,deglobalization,Davos Getting deglobalisation rightJoseph Stiglitz
schools,Sweden,Swedish,voucher,choice Sweden’s schools: Milton Friedman’s wet dreamLisa Pelling
world order,Russia,China,Europe,United States,US The coming world orderMarc Saxer
south working,remote work ‘South working’: the future of remote workAntonio Aloisi and Luisa Corazza

Most Recent Posts

public services,public service,women,public service workers Public services should not be the victims of inflationIrene Ovonji-Odida
gdp,gross domestic product Let’s count what really mattersJayati Ghosh
green transition,just transition,fossil fuel,energy transition,Ukraine,Russia Ukraine and the geopolitics of the energy transitionBéla Galgóczi and Paolo Tomassetti
energy,efficiency,generation,solar,price,inflation From subsidising energy to reducing dependenceHans Dubois
SPO,Rendi-Wagner,Austria,social democratic,social democrat,social democracy A social-democratic decade ahead?Robert Misik

Other Social Europe Publications

National recovery and resilience plans
The transatlantic relationship
Women and the coronavirus crisis
RE No. 12: Why No Economic Democracy in Sweden?
US election 2020

Foundation for European Progressive Studies Advertisement

EU Care Atlas: a new interactive data map showing how care deficits affect the gender earnings gap in the EU

Browse through the EU Care Atlas, a new interactive data map to help uncover what the statistics are often hiding: how care deficits directly feed into the gender earnings gap.

While attention is often focused on the gender pay gap (13%), the EU Care Atlas brings to light the more worrisome and complex picture of women’s economic inequalities. The pay gap is just one of three main elements that explain the overall earnings gap, which is estimated at 36.7%. The EU Care Atlas illustrates the urgent need to look beyond the pay gap and understand the interplay between the overall earnings gap and care imbalances.


BROWSE THROUGH THE MAP

Hans Böckler Stiftung Advertisement

Towards a new Minimum Wage Policy in Germany and Europe: WSI minimum wage report 2022

The past year has seen a much higher political profile for the issue of minimum wages, not only in Germany, which has seen fresh initiatives to tackle low pay, but also in those many other countries in Europe that have embarked on substantial and sustained increases in statutory minimum wages. One key benchmark in determining what should count as an adequate minimum wage is the threshold of 60 per cent of the median wage, a ratio that has also played a role in the European Commission's proposals for an EU-level policy on minimum wages. This year's WSI Minimum Wage Report highlights the feasibility of achieving minimum wages that meet this criterion, given the political will. And with an increase to 12 euro per hour planned for autumn 2022, Germany might now find itself promoted from laggard to minimum-wage trailblazer.


FREE DOWNLOAD

ETUI advertisement

ETUI/ETUC conference: A Blueprint for Equality

Join us at the three-day hybrid conference ‘A blueprint for equality’ (22-24 June).

The case against inequality has already been strongly articulated. Inequality is not just incidental to a particular crisis but a structural problem created by an economic model. Now is the time to explore what real equality should look like.

As a media partner of this event, Social Europe is delighted to invite you to this three-day conference, organised by the ETUI and ETUC. More than 90 speakers from the academic world, international organisations, trade unions and NGOs will participate, including the economist Thomas Piketty and the European commissioner Nicolas Schmit.


MORE INFOMATION HERE

Eurofound advertisement

Minimum wages in 2022: annual review

Nominal minimum wage rates rose significantly in 2022, compared with 2021. In 20 of the 21 European Union member states with statutory minimum wages, rates increased. When inflation is taken into account, however, the minimum wage increased in real terms in only six member states. If current inflation trends continue, minimum wages will barely grow at all in real terms in any country in 2022.


AVAILABLE HERE

About Social Europe

Our Mission

Article Submission

Membership

Advertisements

Legal Disclosure

Privacy Policy

Copyright

Social Europe ISSN 2628-7641

Social Europe Archives

Search Social Europe

Themes Archive

Politics Archive

Economy Archive

Society Archive

Ecology Archive

Follow us on social media

Follow us on Facebook

Follow us on Twitter

Follow us on LinkedIn

Follow us on YouTube