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.
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.
Except for housing, returns to capital have been flat for decades.
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?
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.
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.
Someone once said no taxation without representation... Could this happen?
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.
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.
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,
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?
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'.
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.
@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.
Instead of a tax for robots, there should be a general tax on capital. There should be an incentive and not a tax for efficiency. A tax on wealth might make it also possible to reduce tax for labor.
"Temporary taxes to compensate displaced workers are one way to reduce the level of resistance and lubricate progress." -- Sean Lynch.
Have there been temporary taxes in democracies? Wouldn't the recipients (receiving an amount they greatly appreciate) always vote for continuation of the tax? They also have reason to be aware of threats to the tax. Wouldn't the taxpayers (each of whom provides only a tiny amount to the displaced worker fund) have little reason to try to end the tax? Wouldn't the taxpayers lack reason to be aware of threats to the displaced worker fund?
So a plausible theory of human nature strongly suggests that such a tax would have considerable momentum.
Have there been taxes that were ended in democracies? Yes. Has anyone studied to see how rare or common that is? I would like to know! It would show whether the theory is close or far from reality. I seriously am curious if such a study has been done.
Someone else put it succinctly: "There is nothing so permanent as a temporary government program." -- MF
"Have there been temporary taxes in democracies? Wouldn't the recipients (receiving an amount they greatly appreciate) always vote for continuation of the tax? They also have reason to be aware of threats to the tax. Wouldn't the taxpayers (each of whom provides only a tiny amount to the displaced worker fund) have little reason to try to end the tax? Wouldn't the taxpayers lack reason to be aware of threats to the displaced worker fund?" --DavidO
The recipients would certainly be a "focused benefit", but displaced workers tend to have little voice anyway; it's usually their employers who are screaming for protection. Of course, this is also why most of the time progress that benefits capital owners doesn't tend to get slowed down much.
To ever get enacted, a "robot tax" would have to be supported by people with a lot of voice, like Bill Gates and progressives generally. Would such people want to keep the tax around indefinitely? Maybe. Would other interests try to coopt the tax? Maybe. Which is why the only way I'd support such a thing is if I felt it was irrevocably tied to the cost to pay the benefit to a specific set of people, i.e. those who had been in jobs that were eliminated because of improvements in productivity.
I also would only support it as an alternative to approaches such as the UBI or other general expansions of welfare based on the myth that "this time things are different" and productivity improvements will cause a permanent reduction in employment. The robot tax is based on the idea that the job losses are temporary and that it's better to directly support the displaced than it is to create a permanent class of unemployed.
I'd certainly support the alternative of doing nothing over a robot tax, but I doubt that's what will happen. Instead we'll get the worst of all possible worlds, with paternalistic expansions in in-kind welfare that cannot be used for retraining purposes, along with government-funded retraining programs that are designed solely to benefit the friends of those in power or produce workers who can take government jobs. Trump's presidency doesn't mean we'll get less welfare, just that it will be even more paternalistic than usual along with corporate welfare directed at a different set of corporate beneficiaries.
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