Tax Not The Robots

Robert Seamans
By Robert Seamans
A number of highly regarded business people and politicians, including Microsoft founder Bill Gates and NYC Mayor Bill De Blasio, have commented on the potential need for a “robot tax.” Interest in such a tax appears to be founded on the belief that robots, and automation more generally, will lead to large job losses. The basic idea behind a robot tax is that firms pay a tax when they replace a human worker with a robot. Such a tax would in theory have two main purposes. First, it would disincentivize firms from replacing workers with robots, thereby maintaining human employment. Second, if the replacement were made anyway, a robot tax would generate revenues for the government that would cover the loss of revenue from payroll taxes. Some proponents of a robot tax also suggest that the revenue could then be used for worker re-training programs or other forms of support for the displaced worker.

While the arguments in favor of a robot tax may be well-intentioned, robot taxes are a misguided idea that would have negative consequences for firms, their workers, and ultimately the economy. To begin with, the assertion that robots are taking jobs is not well founded. Recent research shows that firms that adopt robots experience more employment growth than those that do not. These firms also appear to be more productive, potentially benefiting consumers, although the gains experienced by the adopting firm may come at the expense of firms that do not adopt. Moreover, defining a “robot” turns out to be non-trivial; depending on this definition, a robot tax may affect some industries more than others, regardless of the impact on human labor. Ultimately, a robot tax would lead to slower adoption of robots, especially in industries such as manufacturing where it may be easier to define a “robot,” and this slower adoption will likely lead to less economic growth. Instead of robot taxes, policymakers who want to help workers displaced by automation should focus on other policies, such as addressing disparities in taxes on capital and labor and easing labor market frictions. Doing so would benefit workers, firms, and the economy more so than would a tax on robots.

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Robert Seamans is Associate Professor of Management and Organizations.