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

32 Pages Posted: 15 Mar 2017 Last revised: 10 Sep 2021

See all articles by Ryan Abbott

Ryan Abbott

University of Surrey School of Law; University of California, Los Angeles - David Geffen School of Medicine

Bret Bogenschneider

Christopher Newport University

Date Written: March 13, 2017

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. This is because the vast majority of tax revenues are now derived from labor income, so firms avoid taxes by eliminating employees. Also, when a machine replaces a person, the government loses a substantial amount of tax revenue-potentially hundreds of billions 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 through some combination of 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, and increasing the corporate tax rate.

Keywords: Taxation, tax policy, automation, robot law, law and technology, technological unemployment

Suggested Citation

Abbott, Ryan Benjamin and Bogenschneider, Bret, Should Robots Pay Taxes? Tax Policy in the Age of Automation (March 13, 2017). Harvard Law & Policy Review, Vol. 12, 2018, Available at SSRN: https://ssrn.com/abstract=2932483 or http://dx.doi.org/10.2139/ssrn.2932483

Ryan Benjamin Abbott (Contact Author)

University of Surrey School of Law ( email )

Guildford
Guildford, Surrey GU2 5XH
United Kingdom

University of California, Los Angeles - David Geffen School of Medicine ( email )

1000 Veteran Avenue, Box 956939
Los Angeles, CA 90095-6939
United States

Bret Bogenschneider

Christopher Newport University ( email )

United States

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