Social Europe

politics, economy and employment & labour

  • Themes
    • Europe 2025
    • The Crisis Of Globalisation
    • The Future of Work
    • What is inequality?
    • Inequality In Europe
    • Europe’s Refugee Crisis
    • Where Now After Brexit?
    • Understanding PEGIDA in Context
  • Podcast
  • Videos
    • Video Podcasts
    • Social Europe Talk
  • Books
  • Papers
    • Brexit Paper Series
    • Occasional Papers
    • Research Essays
  • Advertise
  • Newsletter

Taxing The Robots?

by Robert Shiller on 30th March 2017 @RobertJShiller

Robert Shiller

Robert J Shiller

The idea of a tax on robots was raised last May in a draft report to the European Parliament prepared by MEP Mady Delvaux from the Committee on Legal Affairs. Emphasizing how robots could boost inequality, the report proposed that there might be a “need to introduce corporate reporting requirements on the extent and proportion of the contribution of robotics and AI to the economic results of a company for the purpose of taxation and social security contributions.”

The public reaction to Delvaux’s proposal has been overwhelmingly negative, with the notable exception of Bill Gates, who endorsed it. But we should not dismiss the idea out of hand. In just the past year, we have seen the proliferation of devices such as Google Home and Amazon Echo Dot (Alexa), which replace some aspects of household help. Likewise, the Delphi and nuTonomy driverless taxi services in Singapore have started to replace taxi drivers. And Doordash, which uses Starship Technologies miniature self-driving vehicles, is replacing restaurant delivery people.

If these and other labor-displacing innovations succeed, surely calls to tax them will grow more frequent, owing to the human problems that arise when people lose their jobs – often jobs with which they closely identify, and for which they may have spent years preparing. Optimists point out that there have always been new jobs for people replaced by technology; but, as the robot revolution accelerates, doubts about how well this will work out continue to grow. A tax on robots, its advocates hope, might slow down the process, at least temporarily, and provide revenues to finance adjustment, like retraining programs for displaced workers.

Such programs may be as essential as our work is to healthy human life as we know it. In his book Rewarding Work, Edmund S. Phelps emphasized the fundamental importance of maintaining a “place in society – a calling.” When many people are no longer able to find work to support a family, troubling consequences ensue, and, as Phelps stresses, “the functioning of the entire community may be impaired.” In other words, there are externalities to robotization that justify some government intervention.

Critics of a robot tax have emphasized that the ambiguity of the term “robot” makes defining the tax base difficult. The critics also stress the new robotics’ enormous, undeniable benefits to productivity growth.

But let’s not rule out so quickly at least modest robot taxes during the transition to a different world of work. Such a tax should be part of a broader plan to manage the consequences of the robotics revolution.

All taxes, except a “lump-sum tax,” introduce distortions in the economy. But no government can impose a lump-sum tax – the same amount for everyone regardless of their income or expenditures – because it would fall heaviest on those with less income, and it would grind the poor, who might be unable to pay it at all. So taxes have to be related to some activity indicative of ability to pay taxes, and whatever activity it is will be discouraged as a result.

Frank Ramsey published a classic paper in 1927 arguing that to minimize taxation-induced distortions, one should tax all activities, and he proposed how to set tax rates. His abstract theory has never been a fully operational principle for actual tax rates, but it provides a powerful argument against presuming that the tax should be zero for all but a few activities, or that all activities should be taxed at the same rate.

Activities that create externalities might have a higher tax rate than Ramsey would have proposed. For example, taxes on alcoholic beverages are widespread. Alcoholism is a major social problem. It destroys marriages, families, and lives. From 1920 to 1933, the United States tried a much harsher market intervention: outright prohibition of alcoholic beverages. But it turned out to be impossible to eliminate alcohol consumption. The alcohol tax that accompanied the end of Prohibition was a milder form of discouragement.

Discussion of a robot tax should consider what alternative we have to deal with rising inequality. It would be natural to consider a more progressive income tax and a “basic income.” But, these measures do not have widespread popular support. If support is not widespread, the tax, even if imposed, will not last.

When taxes on high incomes are raised, usually in wartime, it turns out to be only temporary. Ultimately, it seems natural to most people that taxing successful people to benefit unsuccessful people is demeaning to the latter, and even the recipients of the handout often do not really want it. Politicians know that: they usually do not campaign on proposals to confiscate high incomes and pad low incomes.

So, taxes must be reframed to remedy income inequality induced by robotization. It may be more politically acceptable, and thus sustainable, to tax the robots rather than just the high-income people. And while this would not tax individual human success, as income taxes do, it might in fact imply somewhat higher taxes on higher incomes, if high incomes are earned in activities that involve replacing humans with robots.

A moderate tax on robots, even a temporary tax that merely slows the adoption of disruptive technology, seems a natural component of a policy to address rising inequality. Revenue could be targeted toward wage insurance, to help people replaced by new technology make the transition to a different career. This would accord with our natural sense of justice, and thus be likely to endure.

Copyright: Project Syndicate 2017 Robotization without Taxation?

TwitterFacebookLinkedin
Home ・ Columns & Interviews ・ Taxing The Robots?

Filed Under: Columns & Interviews, Employment and Labour Tagged With: digitalwork, ProSyn

About Robert Shiller

Robert Shiller, Professor of Economics at Yale University and Chief Economist at MacroMarkets LLC, is co-author, with George Akerlof, of Animal Spirits: How Human Psychology Drives the Economy and Why It Matters for Global Capitalism.

Partner Ads

Most Recent Posts

Access to social protection, for some Ane Fernandez de Aranguiz and Bartłomiej Bednarowicz
Economic growth versus social security—redeeming the EU’s original sin Roberta Ferrara and Valerio Alfonso Bruno
coal Why should just transition be an integral part of the European Green Deal? Béla Galgóczi
Just Transition Fund A Just Transition Fund: one step on a long march Ludovic Voet
climate strike Why we strike again Greta Thunberg, Luisa Neubauer and Angela Valenzuela

Most Popular Posts

election in Poland The parliamentary election in Poland—the future at stake Maria Skóra
radical right Why the radical right is no longer the exclusive domain of older, male voters Caroline Marie Lancaster
digital currencies Mario Draghi and the Germans Peter Bofinger
Manchester Could a progressive phoenix arise from the ashes of the UK’s political meltdown? Paul Mason
populism What’s driving populism? Dani Rodrik

Other Social Europe Publications

For a Europe with a Future
Europe 2025 – A New Agenda
OP 14: Changing the Game: EU Development Policy for Sustainable Equality
Austerity: 12 Myths Exposed
The Crisis of Globalisation

Hans Böckler Stiftung Ad

The Blocked Completion of the European Monetary Union

The reform of the euro zone is stuck. Against the background of political blockades, this report examines from a combined economic and political science perspective how the Euro can be prepared for the next crisis. The report first identifies general requirements for the stabilization of economic and monetary union. Next, the report reconstructs the political logic of the euro crisis and shows that the prospects for realizing far-reaching reform proposals aiming at a fiscal union are poor. Subsequently, the report develops a proposal of how, under the given circumstances, the room for maneuver within the existing framework of economic and monetary union can be extended in a pragmatic way in order to strengthen national fiscal policy as an instrument of macroeconomic stabilization.


FREE DOWNLOAD

ETUI Advertisement

Migrant workers in Fortress Europe

The number of legally resident migrants stands at over 22 million, but the number of Europe’s “undocumented” migrants, whose status is precarious and whose rights in many areas are limited as a result, is much harder to determine. These migrants are often forced to tolerate adverse working conditions; since they are discriminated against in the labour market, both male and female migrant workers are pushed into low-skill industries and professions that are more hazardous to health and less well-paid than other jobs, a situation that is justified by racist stereotypes and assumptions. The goal of the HesaMag editorial team in compiling this report was to introduce readers to a number of real-life examples drawn from a variety of EU Member States.


FREE DOWNLOAD

Eurofound Advertisement

Challenges and prospects in the EU: Quality of life and public services

What have been the major developments in quality of life and public services in Europe in recent years? This flagship publication provides a synthesis of the main findings on several key topics, based, in part, on European Quality of Life Survey data. It maps developments and perceptions regarding the following: trust in institutions and social cohesion; access to and quality of health and care services; the impact of digitalisation on social services; access to services for young people; and measures aimed at integrating refugees. While the report highlights many challenges and emerging issues for public services, it also showcases a number of positive experiences with the involvement of client groups in the design of services and take-up of new technologies.


CLICK FOR MORE INFO

S&D Group Ad

At the beginning of the new EU legislative cycle, this occasional paper by Udo Bullmann (MEP and S&D Group coordinator in the European Parliament’s Development Committee) makes the case for an EU development policy that puts the UN Sustainable Development Goals (SDGs) and a concern for human well-being front and centre. The paper argues that EU development policy must serve to fight inequalities in partner countries to enable successful transformations in the spirit of the SDGs. Weaving a concern for achieving greater equality into the process of EU development policy-making, including through ex-ante assessment tools, is key in this regard.


FREE DOWNLOAD

Social Europe Edition Book

Is an unconditional basic income without means-test or work-test compatible with social justice and individual self-worth? Does it open up the space for an end to demeaning labour and a resurgence of voluntary work and cultural life? Is it affordable? This collection of short but compelling essays, all previously published in Social Europe, allows both proponents and opponents to make their case and is designed to extend this vital discussion to a wider audience.


MORE INFO

About Social Europe

Mission Statement & Editorial Team

Article Submission

Social Europe ISSN 2628-7641

Legal & Privacy

Legal Disclosure

Privacy Policy

Copyright

Thought Leadership

XThis website uses cookies to improve your experience and we assume you are ok with this. Do not use this website if you have objections. Read Our Full Privacy Policy RejectAccept
Privacy & Cookies Policy

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these cookies, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may have an effect on your browsing experience.
Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these cookies, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may have an effect on your browsing experience.

Necessary
Always Enabled

This is an necessary category.

Analytics
Advertisement
Performance
Uncategorized
Save & Accept