Saturday, March 11, 2017

A Proposal to Triple Tax Robots

Certainly there will be taxes that relate to automation. 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.
(Bill Gates, from a Quartz interview
A robot that does a job earns income for its owner. If the owner is an individual, that income gets taxed—income tax, social security tax, all those things. If the owner is a corporation, the income pays corporate income tax then is paid to the stockholders as dividends and taxed again, although at a lower rate than ordinary income.

Gates is proposing that we replace the double tax with a triple tax.

I expect one could construct arguments for special taxes on capital that replaces labor that were not absurd, although there is no particular reason to focus on robots—capital has been substituting for labor at least since the invention of the plow, probably longer. 

But this one is either stupidity, unlikely in the case of Gates, or blatant demagoguery.


At 1:11 PM, March 11, 2017, Blogger Shaddox said...

I think it's a deliberate simplification of Gates' broader point, which is the standard modern Pikettian argument that return on capital is snowballing and inequality is getting out of hand. I don't think this argument is unreasonable, although people have very different solution proposals and blame attributions (not to mention definitions of important terms like "capitalism"). I doubt Gates really thinks a simple robot-for-human income tax equivalence is a good or even feasible idea, and I also doubt he intends listeners to interpret it as a genuine policy proposal. Unfortunately, I suspect some listeners will.

At 2:07 PM, March 11, 2017, Blogger Kevin Erdmann said...

Except for housing, returns to capital have been flat for decades.

At 5:20 AM, March 12, 2017, Anonymous The Original CC said...

Serious question here:
1. If a business owner buys a robot, he pays corporate tax on the net earnings (how much the robot earns him minus the cost of the robot) and those earnings get taxed again as dividends.

2. If a business owner hires a person, he again pays corporate tax on the net earnings (how much the person produces beyond his salary + employer portion of payroll taxes), and those earnings get taxed again as dividends.

So far it looks like the robot is slightly cheaper (depending on the economic incidence of the employer portion of payroll taxes), consistent with what Gates said.

But then it gets worse, b/c the economic incidence of all the other taxes that Gates mentioned, i.e. incomes and employee portion of payroll taxes.

So it does seem that the human is artificially more expensive. What did I miss?

At 8:53 AM, March 12, 2017, Blogger Unknown said...

I don't think it's entirely unreasonable to bribe people not to interfere in progress when that progress disrupts their lives. I think the important thing is that it be temporary and that it not slow progress too much. One extreme would be India's support of hand weaving against power looms, which has been permanent. But what if India had instead taxed automated weaving and used the money to support just those who had been in the handweaving industry? Even if it had been a stipend for life, literally everyone would have been better off than under the alternative that was actually put in place.

So I support such a triple tax only as an alternative to other ways of trying to slow automation, and only if it's temporary and supports only workers plausibly displaced by automation.

At 4:15 PM, March 12, 2017, OpenID maxgoedl said...

What if the robots are smart enough to rebel against their owners? What if they are smarter than us so that they own us, not the other way around?

I suppose in the first case, they would effectively become another class of workers who receive more than their `subsistence' income, i.e. more than what's necessary to keep the robot functional. In that case, I think robots are capable of bearing a tax burden in the sense that they might have to cut down on their consumption (of whatever it is they consume) when faced with a tax on their labor.

In the second case, all these problems are kind of moot I guess.

At 1:15 AM, March 13, 2017, Blogger Simon Goldie said...

Someone once said no taxation without representation... Could this happen?

At 2:01 AM, March 13, 2017, Blogger Joe Munson said...

I think its surprisingly easy to say something stupid in an interview, especially when its outside of your primary specialization and especially when you're rich enough that nobody will question or correct it.

So it might not be demagoguery, I just see no motive for demagoguery, unless its a calculated shift to make his what the public perceives his beliefs to be more in line with the median American voter.

I feel like since Trumps election every yahoo with a billion dollars thinks (with good reason) they might be able to get into politics.

At 6:13 AM, March 14, 2017, Anonymous Anonymous said...

Will the robot get a healthcare plan, free (at point of delivery) education for its little robot children, a Government pension when it is too old to work, etc? If not then what is the income tax paying for?

And when will people get it, only Humans pay tax, so that robot income tax will be incident on Humans and those Humans will be consumers who will have the cost benefit of employing machines instead of Humans wiped out by having to pay for what they consume more to cover the income tax.

Meanwhile: is not a tractor and plough a robot? How about all those robots on car production lines, a washing machine, a dishwasher?

Machines (or robots if you like) replacing Human activity started with the wheel and became known as the Industrial revolution. Many, many jobs have gone over the last 200 years or so 'lost' to machines yet there are many times more jobs today than back then, and also many more people doing them.

Do people have no history?

The sheer tonnage of absurdity of a robot tax is difficult to quantify.

Bill Gates has gone the way of all those who have too much money and time on their hands - ga-ga.

At 9:39 PM, March 14, 2017, Blogger winston smith said...

tax robots? How about just throwing the entire morally indefensible, completely unsustainable feudal thing we euphemistically call "capitalism' in trash of history where it so belongs?
Money is meant facilitate trade. Capitalism is an exploitative scarcity-based system that is the vestige of another age, and is chocking the life out of the planet and every living thing on it,

At 9:54 AM, March 15, 2017, Blogger Sean Lynch said...

I agree that the present system is not great, Winston. I can think of alternatives that might be better, but I'm interested in knowing what you would propose as an alternative?

At 7:13 PM, March 16, 2017, Anonymous Anonymous said...

A backhoe replaces a half dozen guys with shovels. A horse pulling a plow replaces the person who pulled it before. A train replaces hundreds who would be required to carry the same load on their backs. None of these seem to inspire the desire for extra layers of taxes. It is strange that many want higher confiscation on equipment if it is labeled as a 'robot'.

At 1:24 AM, March 17, 2017, Anonymous Know More said...

Wow great, I have read many articles about this topic and every time I learn something new I don’t think it will ever stop always new info, Thanks for all of your hard work!

At 10:11 AM, March 17, 2017, Blogger Sean Lynch said...

Actually, backhoes DID cause significant backlash from manual laborers, but laborers had very little political voice then. Do you think communism appeared out of thin air for no reason? Every major advance in productivity has met with resistance. Temporary taxes to compensate displaced workers are one way to reduce the level of resistance and lubricate progress.

At 9:25 PM, March 26, 2017, Blogger Simon said...

@The Original CC
So it does seem that the human is artificially more expensive. What did I miss?

What you missed is that the cost of the robot does not vanish into thin air. It is paid to other people who either make a profit, labour income, or pay others - ultimately it all gets taxed.

When you take into account the double taxation of capital as pointed out in the OP, it is taxed more than the human already.


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