Should Robots be Taxed ?

The Increasing Threat Posed By Automation

Automation is changing the world that we live in at an increasing pace. With each passing day, the capabilities of robots are increasing more and more. They are becoming a sort of pseudo human race as they have acquired almost all the thinking capacity that a human has.

With giant strides in technology taking place, companies are now able to automate tasks that were previously thought to be impossible to automate.

This may seem like a wealth of opportunity to the entrepreneurial class. However, for the average worker, this is a severe threat. It is likely to make them redundant in the next 10 years or so. To prevent this from happening and to ensure that humans and robots have a level playing field, Bill Gates, the wealthiest man in the world has proposed that we tax the robots. Some people think this is a good idea whereas others think it is ridiculous.

In this article, we will weigh the pros and cons of automation to come to a conclusion whether robots should actually be taxed!

The Lowest Strata Will be Hit Hardest

The point in favor for taxing the robots is that they will affect the people from the lowest strata the most. Jobs that require less intelligence are easier to automate. Consider the case of driverless cars being tested by Google.

If the experiment is a success, it will be a blow to millions of cab workers worldwide. Also, millions of drivers who work in the logistic industry will be unemployed.

Jobs like these where workers make slightly more than minimum wage are the most under threat. Even in Amazon’s new store, there are no staff members at checkout counters. Low pay retail jobs are also under threat!

Bill Gates Proposal to Prevent This

Bill Gates is of the opinion that the field is currently tilted in favor of robots. This is because when employers pay their workers a certain sum of money both are supposed to pay taxes, making it expensive to hire workers.

On the other hand, when employers spend on workers there are no taxes at all! It is cheaper to hire robots than it is to hire people. Also, the burden of taxes like social security, Medicaid, etc. falls disproportionately on the lower wage workers.

Bill Gates believes that the amount of money that employers spend on automating the process should be taxed. All this money should be put into a common fund. This fund must then be used to distribute money to every member of the society.

Since people from the lowest strata of the society are likely to lose their jobs due to automation, they are the ones whose incomes should be supplemented.

Technology Compliments Workers

The flaw with Bill Gates argument is that it has a regressive thought process. Technology does cause disruption in the short run and leads to loss of jobs. However, in the long run, humanity is better off as a result of technology.

Consider the case of the printing press during the industrial revolution. If printing press was taxed during its inception, it would have pushed back humanity by several years.

Technology should be viewed as complementing the workforce. It will extinguish low-end jobs that require no brain and a lot of labor. Instead, it will create high-end jobs, and everyone will be better off.

The governments should focus their efforts on training the workforce to take high-end jobs rather than trying to implement regressive tax regimes that would impede development.

Taxing Capital Investments

It is not that automation would take away money and jobs from all humans. It would just be a redistribution of wealth from the poor to the wealthy.

Technical people who tell the machines what to do will make a lot of money and so will the people who own the machines. Hence, people with a socialistic bend of mind tend to argue that the purchase of robots needs to be taxed. The problem with this proposal is that it does not make sense.

Firstly, how would you define a robot! Even computers replace human effort, and so does the fan hanging on your ceiling. If every form of machine that reduces human effort is taxed, that would amount to a tax on capital investments.

Taxing capital investments is the equivalent of financial suicide for an economy as it deters growth and creation of new jobs. Rather it breeds stagnation and is almost certain to lead to a recession if it is implemented over a larger period of time.

Impractical To Implement

Lastly, Bill Gates’ proposal is impossible to execute in real life. It is not possible to accurate the differential earning that a robot would generate over a worker.

The wages that have to be paid to the worker, as well as the productivity of the robot, are both uncertain. As a result, it would be difficult to accurately determine the tax base over which taxes have to be levied. Also, it is possible that the manufacturers bundle software with hardware and make it very difficult to determine which product should be taxed and which shouldn’t be.

To sum it up, taxing the robots is a regressive strategy which if implemented is likely to cause more harm than good.

Authorship/Referencing - About the Author(s)

The article is Written and Reviewed by Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to ManagementStudyGuide.com and the content page url.