If robots are taking your job, should they pay tax?

Even Bill Gates has floated the idea – but does robot tax make any sense?
26 January 2021

Eliminating human-to-human transmission, capable of working in hazardous areas, and a solution to ensuring business continuity amid a period of mass disruption, the events of 2020 have ignited new interest in robotics. 

For decades, this technology has been put to task, fixed to the ground of automobile production lines. But more recent advances in artificial intelligence and data analytics have led to the development of ‘smarter’ units that, today, are capable of anything from disinfecting hospital wings with UV lights, stacking shelves in Walmart, and even flipping burgers in White Castle. 

Away from the pandemic, vehicle manufacturers like Daimler are racing to develop autonomous trucks to solve a driver ‘gap’ in the US. In the UK, Brexit is leading agriculture firms to explore further how robotics can retain productivity and optimize domestic yields in the face of seasonal labor shortages and increased reliance on home-grown produce. 

In sum, the overriding industrial benefits of increased productivity, efficiency, and resilience have spurred a global market surging forward at a CAGR of 26%, ready to amass a worth of US$210 billion by 2025 (Statista). 

Robot tax

For businesses, there is no shortage of vendor choice in this highly-competitive market, and with an expected rise in Robotics-as-a-Service offerings, the technology will become accessible even to the smallest firms. 

That adoption, however, could be coming at too high a rate, and despite the many apparent benefits of physical automation in industry, if left unchecked, such rapid uptake could be unsustainable in its detrimental impact on society. 

Just how quickly that impact could be felt remains unclear. A report by the Brookings Institute estimated the effect of automation on jobs in the US could take hold in “a few years or two decades.”

Ultimately, disruption seems inevitable. The same report estimated that 25% of jobs would be displaced, accounting for the work of roughly 36 million Americans whose jobs are deemed “high exposure” to automation, with at least 70 percent of these tasks able to be performed effectively by machines in the future. Among those jobs, food services— including cooks and waiters— short-haul truck drivers, and clerical office workers were are considered to be some of those most at risk.

In light of this problem, influential commentators, including Microsoft founder Bill Gates himself, have pointed to the potential for a ‘robot tax’. 

In an interview with Quartz, Microsoft founder Bill Gates argued that a tax on organizations deploying robotics at scale would help finance jobs where humans are required but needs are unmet – such as care for the elderly or working with children at schools. 

Far from deriding the benefits of automation, Gates urged lawmakers to be “willing to raise the tax level and even slow down the speed [of automation]” 

“That’s because the technology and business cases for replacing humans in a wide range of jobs are arriving simultaneously, and it’s important to be able to manage that displacement,” Gates said.

Core to the robot tax concept is the premise that beyond the initial outlay, where an employee would contribute a portion of his or her income monthly, a robot (sophisticated though the technology is) contributes zero. 

Source: Shutterstock

As floated in 2019 by New York city mayor and Democratic Party member, Bill de Blasio, a robot tax should apply to any company introducing labor-saving automation – such as an autonomous pallet truck – and would require the government to pay five years worth of taxes for each worker displaced by innovation. It would also insist that the employer also find new jobs for the displaced worker at their same pay level or pay them a severance.

But de Blasio said the tax would also require a new federal agency to determine which jobs were eliminated by automation and how much robot tax employers would owe, and finally, it would require Washington to eliminate all tax incentives for any innovation that leads to automation.

That’s a hefty proposal, and one based on the common assumption that those displaced by robots and automation will never find similarly paid work again. That’s despite historical evidence showing that while initially displacing certain jobs, automation technology eventually creates more in the long run, even amid boosts to productivity.

“To be sure, it is hard — impossible in fact — to imagine what new areas of employment will emerge in response to any wave of innovation.  It is always easier to look at who is losing,” wrote Milton Ezrati in Forbes.

“[…] when in the last decades of the twentieth-century word processing, email, and the Internet generally displaced thousands of typists, messengers, and administrative assistants, the feared class of unemployable people never emerged because those same technologies also facilitated any number of occupations previously undreamed of. Among them was Federal Express and similar delivery services, including, in more recent years, Amazon.”

In the finance sector, the introduction of automatic teller machines (ATMs) threatened to throw thousands of bank clerks out of work. But the increased productivity led to more profit, which meant banks could hire more staff than ever before who, with the assistance of new technology, could do more interesting and valuable work than before ATMs were put in place.

While the massive job losses posed by robotics remains, for now, a reasonably distant and theoretical concern, the pandemic has accelerated every industry’s adoption of technology. As we invest in and implement technology faster than ever before, now may be the time to ensure a braking mechanism is in place. 

Introducing a robot tax would serve the purpose of slowing ‘job-destroying’ automation while raising revenue to supplement shrinking taxes paid by human workers. As noted by WSJ, this could take various forms, such as levies amounting to payroll-style taxations, or a slowdown to tax deduction for businesses that replace employees with robots.

But what any kind of robot tax has in common is penalizing innovation and the adoption and progression of technology – and that can surely never be a good thing.