The capability of artificial intelligence has reached a point that it is no longer a question of if robots will replace people, but a matter of when. Highly automated factory floors, driverless cars, and computerized medical diagnoses all exist today. In the not too distant future it is plausible that a large percentage of highly skilled jobs will be performed by robots. In the fields of engineering, finance, and scientific research computers have already surpassed the ability to process data in a far superior manner than the brightest humans on the planet.
Therefore, if millions of workers were suddenly displaced without a means of earning a living, what is society supposed to do? Several tech leaders like Elon Musk and Jeff Bezos have proposed that government provide a universal basic income for displaced workers. Now, think about that for a moment. A universal income in today’s rancorous and divided political environment? And, who is going to pay for it?
Our current tax system is based upon the premise that a growing economy leads to growth in employment; which in turn leads to growth of the overall tax base. However, that theory is predicated upon classical economy theory that states that capital employs labor to drive the means of production. Yet, some of the largest companies in the world like Apple, Google, and Facebook generate more revenue and command a larger market value than traditional industrial companies such as General Motors, Dow Chemical, and Boeing. And, they achieve these results with about a tenth of the workforce.
Thus, it is by no means a stretch of the imagination to envision a world where companies generate profits hand over fist with only a handful of employees. So, how should highly efficient, automated companies be taxed? Do we continue to tax them like we always have, a net income based profit tax? Or, should there be an excise tax to fund payments of lost income and retraining programs for displaced workers? In an interview earlier this month, Bill Gates proposed that governments should tax companies who utilize robots.[i] The EU Parliament even considered a proposal to enact a “robot tax”, but the proposal failed to gain any traction.[ii]
These are serious problems that policymakers will be forced to address sooner than later. Many economists have estimated that over the next ten years, more jobs will be lost to automation than the total number of manufacturing jobs lost to globalization. If that is the case, do you think that robots should be taxed?
[i] Morris, David Z. 2017, February 18. Bill Gates Says Robots Should Be Taxed Like Workers. Fortune Tech. Retrieved from http://fortune.com/2017/02/18/bill-gates-robot-taxes-automation/
[ii] Reuters. 2017, February 16. European Parliament Calls for Robot Law, Rejects Robot Tax. Technology News. Retrieved from: http://www.reuters.com/article/us-europe-robots-lawmaking-idUSKBN15V2KM
William E. Rogers, MBA, CFP, EA is the founder of Ascend Business Advisory, a boutique tax and financial advisory firm in San Diego, CA. He has a BS in Business Management from the University of Redlands, an MBA from the University of Southern California, and an MS in Finance from Golden Gate University. His practice specializes in serving the needs of entrepreneurial start up companies.
3 comments on “If Robots Replace People, Should They Be Paying Taxes?”
What a thoughtful post William! There is a great book out called the Future of the Professions. All is not lost for tax professionals as the book lays out very nicely that the roles will be more consultative.
The question is will machines be taxed is a very good question, indeed!
Who’s going to pay into the payroll tax system
Dear Steve,
Excellent question and extremely thought provoking. Due to the advances in AI and automation there may be a need to re-think who or what is to be taxed. The undeniable issue is that there will be workers displaced and what do we do about them, and ultimately how are we going to pay for any massive retraining efforts?
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