Proposals to tax robots have been debated by serious folks recently. The European Union considered but ultimately rejected the idea of taxing firms that use robots. And last week Quartz published an interview with Bill Gates in which he argues for a robot tax. These proposals follow a spate of recent articles on robots and automation, some of which argue there will be large job losses from robots and automation. These articles include one in the New Yorker, which profiled books by Martin Ford, Jerry Kaplan, Erik Brynjolfsson and Andrew McAfee, and David Autor’s article on workplace automation in Journal of Economic Perspectives, among others.
There’s no question that the potential increase in robots and automation requires policy makers to rethink fiscal policy for the 21st century (and other policy as well, such as education and retraining policy). But, based on the data we currently have, a tax on robots would be bad policy. Robot taxes would dissuade firms from investing in robots, which would lower economic growth, and, to the extent that robots complement labor in some cases, would lead to less hiring and lower wage growth.
What Is A Robot?
There are a number of problems with the idea of taxing robots. The first problem is definitional. In a manufacturing context, a robot typically refers to a robotic arm. As defined by ISO 8373, an industrial robot is an “automatically controlled, reprogrammable, multipurpose manipulator programmable in three or more axes, which may be either fixed in place or mobile for use in industrial automation applications.” But people also use the term “robot” to refer to software algorithms, including Amazon’s Alexa and Apple’s Siri, and many of us now routinely interact with chatbots, which have replaced human operators.
Do automated sorting machines count as robots? A worker sits behind a computer in a giant semi-automated distribution center in England. (Photo by Oli Scarff/Getty Images)
When we say we want to tax robots, do we want to tax all types of robots, including software robots and other forms of automation, or just robot arms? If we confine our definition of robot to a robot arm, then the robot tax ends up being a tax borne primarily by the manufacturing sector, and not by other sectors of the economy that will likely invest heavily in automation, including autonomous vehicles in trucking and transport, smart conveyor belts in warehouses, electronic checkouts in retail, etc. Manufacturing comprises about 9% of the U.S. economy on average, but up to 15% of employment in some states. Taxing investment in a handful of states based on an arbitrary definition of what does or does not comprise a “robot” does not seem to be good policy.
Robots Increase Economic Growth
Even if there were good ways to define a robot, there are good reasons not to tax the use of robots and automation. The Council of Economic Advisers’ 2016 Economic Report of the President cited research showing that robots can boost gross domestic product growth by 10% and labor productivity growth by over 15%, numbers similar to the impact of steam engines on British labor productivity growth in the 19th Century.
