Should Robots Be Taxed?

73 Pages Posted: 11 Sep 2017

See all articles by Joao Guerreiro

Joao Guerreiro

Northwestern University

Sergio T. Rebelo

Northwestern University - Kellogg School of Management; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Pedro Teles

Federal Reserve Bank of Chicago; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: September 2017

Abstract

We use a model of automation to show that with the current U.S. tax system, a fall in automation costs could lead to a massive rise in income inequality. This inequality can be reduced by making the current income-tax system more progressive and by taxing robots. But this solution involves a substantial efficiency loss. A Mirrleesian optimal income tax can reduce inequality at a smaller efficiency cost. An alternative approach is to amend the current tax system to include a lump-sum rebate. With the rebate in place, it is optimal to tax robots as long as there is partial automation.

Suggested Citation

Guerreiro, Joao and Tavares Rebelo, Sergio and Teles, Pedro, Should Robots Be Taxed? (September 2017). NBER Working Paper No. w23806. Available at SSRN: https://ssrn.com/abstract=3035149

Joao Guerreiro (Contact Author)

Northwestern University

Sergio Tavares Rebelo

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
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Evanston, IL 60208
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Centre for Economic Policy Research (CEPR)

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National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
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Pedro Teles

Federal Reserve Bank of Chicago ( email )

230 South LaSalle Street
Chicago, IL 60604
United States
312-322-2947 (Phone)
312-322-2357 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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