A Blog by Jonathan Low


Jun 3, 2017

Who Will Pay For the Future If Not the Robots?

If tax revenues in most countries are currently based on individuals and those individuals are replaced by robots, then why not tax the robots? JL

Matt Simon comments in Wired:

The tax system in the US is still people-centric. Cities and states get about 30% of their revenue from property taxes, 20% from sales tax, and 20 from individual income taxes. When you’ve got mass unemployment, those revenue sources all tumble.“If revenues drop by a third”—the projected impact of automation - “that means services need to be cut back by a third through the services we provide.”
Robots are taking over the world’s workforce—and why shouldn’t they? For so many jobs, machines are faster, more consistent, smarter, and cheaper than you or I will ever be. As advances in artificial intelligence accelerate, robots will spread into all corners of the labor market: blue collar and white collar, service work and knowledge work alike. Along with their jobs, people will lose their incomes. When that happens, governments will also lose theirs. Where does the money come from without incomes to tax?
One San Francisco lawmaker is trying to get ahead of this likely revenue gap by going after the source of the problem: She wants to tax the robots. Supervisor Jane Kim has been meeting with labor leaders, academics, and tech types to explore the radical plan, a natural fit for a city where billionaire tech bros and liberal politicians both hold sway. But there’s at least one problem with Kim’s plan: No one can really agree on what a robot is.
The concept of a robot tax isn’t new—Kim got the idea from Bill Gates’ instantly infamous interview with Quartz in February. Said Wild Bill: “Right now, the human worker who does, say, $50,000 worth of work in a factory, that income is taxed and you get income tax, social security tax, all those things. If a robot comes in to do the same thing, you’d think that we’d tax the robot at a similar level.” The reaction was swift and not exactly measured, in no small part because tech types appreciate regulation about as much as they appreciate not wearing hoodies and jeans with flip-flops.
But it’s hard to imagine a future in which the US economy loses a third of its jobs to automation and governments just sit on their hands. “I do think that government is going to have to regulate it,” Kim says. “I mean, I know tech hates hearing that word, but we’re all part of a larger community and society, and there are implications when 37 percent of the workforce isn’t working anymore.”
Kim is not a robot-tax evangelist. She’s a supervisor in a city with one of the starkest income inequalities in the world. Robots and AI promise to further concentrate wealth in the hands of the elite techie class. So for Kim, a robot tax is an idea at least worth exploring, not hurriedly enacting next week.

I, Robot?

Ask 10 roboticists what a robot actually is and you’ll get 10 different answers. But here’s one from Hanumant Singh, of Northeastern University: a system that exhibits “complex” behavior and includes sensing and actuation. That’s a super broad answer, and shows just how complex a problem Kim may be up against. A self-driving car is a robot by that definition. So is a 747 on autopilot. And that’s to say nothing of AI, which will arguably replace far more jobs, even if it’s only via algorithms running on smartphones. So would this be a robot/AI tax? Kim is still working through the definitions here.
The question is not just philosophical: If the idea is to make up for the fiscal gaps the robot takeover will inflict, politicians will have to decide what kinds of automation count. Arguably, tax software has already replaced many tax professionals. So do you ding Inuit, the maker of TurboTax? And it’s not hard to imagine a future where you order goods from a bot like the one in your Amazon Echo. The bot then dispatches a delivery robot to your home. So are both parties complicit in circumventing the UPS delivery worker’s job?
Ambiguity in defining what a robot is will likely also open up accounting loopholes. “Maybe you have a robot with multiple arms, so that instead of having to get five robots, you get one robot but it does the work of five robots,” Dean Baker, a cofounder of the Center for Economic and Policy Research. “You avoid the tax on the other four.”Ultimately, however, the question isn’t how many robots but how much productive labor humans lose to them. A job lost is a job lost, whatever the reason, and the consequences are likely to be the same. In West Virginia, the coal industry has declined even without heavy robot infiltration, and mass unemployment has followed. For every displaced worker, the state loses out on income tax. Losing your job means you stop spending money. “So there’s no sales tax revenue because there’s no sales,” says Joseph Henchman, vice president of state projects at the Tax Foundation. “And then property values are depressed because nobody wants to buy property in those towns, so that reduces property tax revenue.”
The ironic difference between a traditional economy in decline and an economy in which robots have come to dominate is that, in theory at least, robots spur greater overall wealth through increased productivity. But the tax system in the US is still people-centric, which in a roboticized future could lead to a revenue death spiral. Cities and states get about 30 percent of their revenue from property taxes, 20 percent from sales tax, and another 20 from individual income taxes. When you’ve got mass unemployment, those revenue sources all tumble in unison. Taxes on corporations, which will benefit most from the lower costs and higher output of robot labor, won’t make up the difference—they tally a mere 4 percent of revenue.
“If revenues drop by a third”—the projected impact of automation—Henchman says, “that means services need to be cut back by a third, either through trying to be more focused or efficient with the services we do provide, or by actually having to pare back what government does.” And those cuts will come at a time when, thanks to mass unemployment driven by automation, demand for those services will be soaring.
Or, say automation advocates, a robot tax could hurt the economy in the name of saving it.
Not too keen on a robot tax is, unsurprisingly, the Association for Advancing Automation. Namely, it’s a matter of staying competitive in an explosive young industry—China, in particular, is overflowing with robotics companies. Start taxing robots and you’re likely to step on capitalism’s toes.
Plus, the group says, automation helped return manufacturing jobs to the US in the first place. “This idea of bringing back manufacturing jobs in part is being enabled by the fact that we can compete if we automate here,” says Jeff Burnstein, the association’s president, “as opposed to doing the manufacturing in a low-wage nation, like we often did over the past two decades.”
As for Kim, she’s still exploring her options. Again, she’s no robot-tax evangelist. She’s a politician who, like most Americans, hasn’t yet been replaced by a robot. And bully for that: I for one would prefer not being turned into a battery.


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