Wednesday, 22 February 2017

Bill Gates Proposes a Tax on Robots

Paul Sweeney: There has been a lot of media discussion recently about the increasing possibility of robots displacing workers. 

When Bill Gates, founder of Microsoft, suggests an income tax on robots, then we know the potential disruption by robots of jobs is serious. “You ought to be willing to raise the tax level and even slow down the speed” of automation, Gates argues here.

Gates is concerned about equity. He is giving away most of his vast fortune, unlike Ireland’s richest. He is an admirer of Chuck Feeney whose Atlantic Philanthropies helped endow TASC in its work on inequality. Also proposing a version of this tax in the French elections is Benoît Hamon, of the French Socialist Party.

Gates says “if you want to do [something about] inequity, a lot of the excess labor is going to need to go help the people who have lower incomes. And so it means that you can amp up social services for old people and handicapped people and you can take the education sector and put more labor in there. Yes, some of it will go to, “Hey, we’ll be richer and people will buy more things.” But the inequity-solving part, absolutely government’s got a big role to play there.”

So he is espousing government as the vehicle for redistribution, for investment in education, for the common good. He is already being attacked. In today’s Financial Times one commentator tries to dish his proposal saying “And herein lies the fallacy of Gates’ argument. A call for robot income tax is really just a call for more corporation tax and/or a wealth tax.” 

Of course it is. More and more international companies are avoiding tax and now doing so with impunity. This is leading to all kinds of undesirable outcomes, such as falling demand, greater concentration of wealth and rising inequality. The OECD’s BEPs plan is addressing massive tax avoidance by international companies, aided by the legal and accounting professionals.

It is possible that such a robot tax could damage innovation which leads to increased wealth and welfare.  But such a tax is worthy of debate. 

An editorial on the issue in the yesterday’s FT was not keen on the robot tax either but interestingly it warned that  “there are well-founded concerns about the speed with which automation can destroy jobs, leaving workers ill-equipped to adjust, and at the uneven manner in which the gains from higher productivity have been shared in recent years. In almost all rich economies, labour’s share of national income has declined. High-income workers and the owners of capital have been the main beneficiaries.” 

When the “paper of record” for the owners of capital worries about labour's decreasing share of national income, then we know there must be a crisis. If automation speeds up and many seem to think it will, ideas, such as a basic income, are possible solutions to mass unemployment and underemployment, but they have to be funded.

Paul Sweeney is Chair of TASC’s Economists Network

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