Home PublicationsCommentary Taxing Robots Would Hurt, Not Help, American Workers

Taxing Robots Would Hurt, Not Help, American Workers

by Daniel Castro
by and
A robot dog exploring a mine

In response to concerns about the effect of automation on workers’ jobs, some policymakers and technology industry leaders have called for a robot tax. They argue a robot tax is necessary to slow job losses from automation, raise revenue to support displaced workers, and prevent more economic inequality. However, these arguments are wrong and a robot tax would ultimately hurt workers.

One argument is that a robot tax is necessary to protect workers from job losses. For example, Bill Gates has argued for a robot tax as a way to “slow down the speed” of job losses from automation. Likewise, former New York City mayor Bill de Blasio has proposed “a ‘robot tax’ on large companies that eliminate jobs through increased automation” and even suggested creating a federal agency that would require businesses “seeking to increase automation that would displace workers” to obtain a government permit. But the goal of government policy should be to accelerate, not slow down, robot-driven automation. More automation means greater productivity, and greater productivity benefits the U.S. economy through higher wages and lower prices.

Another argument is that a robot tax is necessary to raise revenue to support displaced workers. For example, de Blasio wants companies to “pay five years of payroll taxes up front for each employee eliminated” and use these funds to invest in high-employment infrastructure jobs, such as green energy. Gates makes a similar argument, arguing that revenue from a robot tax should pay for jobs that require “human empathy and understanding,” like caring for older adults and children with special needs. Government should support workers impacted by technological disruption, including by reducing financial hardships for laid-off workers and providing more assistance to help those individuals find new jobs, but taxing robots to fund these initiatives would only slow U.S. productivity and wage growth. This idea has as much merit as imposing new taxes on clean energy businesses to pay for jobs lost in the fossil fuel industry.

A third argument is that a robot tax is essential to prevent greater income inequality. For example, Sen. Bernie Sanders has argued for a robot tax to ensure that “the people on top” are not the only beneficiaries of automation. These critics envision a dystopian world where the rich get richer, not by exploiting workers, but by eliminating them entirely. But workers are not disappearing. Indeed, this argument relies on the “lump of labor fallacy” which says there is a limited amount of work and therefore increases in productivity mean fewer jobs. But the evidence tells a different story: Even as labor productivity has increased in the post-World War II era, unemployment is at a record low. Moreover, productivity has doubled since 1984, while domestic profits as a share of gross domestic product (GDP) remain unchanged. Competitive markets mean that increases in productivity do not result in higher rates of profits. Those who want government policy to provide great wealth redistribution do not need to tax robots to achieve this goal. They would be better off taxing rich people more.

Taxing robots would ultimately leave Americans worse off. Companies deploy robots to automate dirty, dull, or dangerous tasks and transition human workers to better and safer jobs. For example, Boston Dynamics’ Stretch robot can unload boxes from trucks at warehousing and storage facilities. Using a robot to unload trucks relieves human workers from handling heavy loads. And discouraging the use of robots could cause U.S. companies to offshore to countries that have embraced automation, thereby weakening domestic supply chains and increasing dependence on foreign countries, such as China.

A robot tax is a misguided policy that would inhibit productivity growth that could otherwise make U.S. companies more competitive, create higher-paying jobs, and improve quality of life for all Americans.

Image credit: Flickr user SNSF Scientific Image Competition

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