The Rise of the Robot Tax

The idea of a robot tax may sound futuristic to some, but with the explosion of artificial intelligence (AI) lawmakers around the world are considering it.  The consequences of enacting a robot tax, and the consequences of not enacting a robot tax could be significant for countries, states, and cities.

What is a Robot Tax?

What is a robot tax exactly?  Generally speaking, a robot tax is the idea of taxing automation that is replacing human jobs.  But, really it is a question with no clear answer, yet.  Nobody can even agree on what a robot is.  Much less, if one should be taxed.  And, if so, how it should be taxed.

Automation is all around us.  What should be taxable and what should not be?  An automated factory line that replaces workers seems easy to classify.  But, what about the self-check out line at your local supermarket?  What about the DVD vending machine in the parking lot?  How about the payment machine at the self-park parking lot down the street?  We see automation everywhere.  And, we are interacting with fewer and fewer human workers.   Would all that automation be taxable?  Should it all be taxable?

As AI technology advances, more jobs are susceptible to being overtaken by robots.  Machine learning and AI enables the software running the robot to “learn.”  As the software “learns,” it become more adaptable to the task at hand.  So, it allows robots to do jobs that they were unable to do before.  Many jobs currently being done by humans could go the way of the robots.

Why a Robot Tax?

As human workers are replaced by robots, the taxes imposed on the workers goes away.  Federal income taxes account for about half of the revenue collected by the IRS every year.  Payroll taxes account for about one-third of the revenue.  As robots continue to replace workers, the massive decline in federal revenue would be astounding.  And, there would be similar impacts at the state and local levels.

And, what about all the displaced workers?  Many discussions on robot taxes include the goal of using some of the tax revenue to help re-train workers for new careers.  But, critics argue that a robot tax would impede innovation.

Can’t Do it Alone

A country would have a difficult time imposing a robot tax on its own.  In 2017, the European Parliament looked into the idea of a robot tax, but then decided against it.  They were concerned that it would impede innovation and put the European Union at a competitive disadvantage.  Their idea was to tax “electronic persons.”  Owners of “electronic persons” would have been liable to pay social security tax for them.

Any one country will have a difficult time enacting the tax alone.  Nobody wants to be the first one to actually enact a robot tax.  They would put their country at a major disadvantage compared to countries without the tax.  Investors would look elsewhere for business ventures.

What Would a Robot Tax Even Look Like?

South Korea enacted what many consider to be the first robot tax.  In 2018, they reduced the tax deduction on business investments in automation.  Although not technically a tax on automation, it is certainly a step in that direction.

Other ideas that have been floated include either a tax on the robots themselves, or a tax on the capital gains earned by use of robots.  There are many different approaches that could be utilized.

Looking to the Future

What happens when robots become less expensive and AI technology continues to improve?  Will any robot taxes initially enacted be able to withstand all of the advancements to come?  Lawmakers really need to tread carefully when considering enacting a robot tax.  They need to be able to envision all of the economic consequences of enacting a robot tax.  But, they also need the ability to look into the future and plan for technologies that don’t even exist yet.  If only we had an AI robot to tell us what to do with robot taxes.  

By Noelle Erber, J.D.

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All stories by: CCHTaxGroup