Technology Review has published an article claiming San Francisco Will Consider a Tax on Robots. Let’s consider their wisdom.
When robots steal our jobs, should they be made to pay taxes? That’s something residents of San Francisco are being asked to think about by Jane Kim, who represents the city’s District 6 on its board of supervisors. She wants to find cash to help folks out with retraining or a universal basic income when robots take over their toils, and the suggestion for generating that money is a tax on robots.
Let me translate: Kim wants to pay for socialist policies by imposing new taxes on businesses that seek to improve their productivity by investing in automation.
San Francisco certainly isn’t stuffed full of robots right now.
And if Kim gets her way, it never will be. Manufacturers will go elsewhere. Only companies that get benefit that they can’t get elsewhere (like, for example, taxi companies) will suffer such a tax, and they won’t bother to automate in San Francisco if they can operate more cheaply without doing so.
But it’s easy enough to imagine a none-too-distant future where autonomous taxis rule the roads and burgers are flipped by bots. In a context where robots are taking over directly from human workers, the idea seems to make sense.
I bet it doesn’t make sense to the business owners.
But similar suggestions in the past—most notably from Bill Gates—have been dismissed, in part because taxing robots disincentivizes companies from adopting them, leading to a failure to capitalize on increases in productivity that can stimulate the economy.
Or, more likely, relocating somewhere that doesn’t have such a policy and increasing productivity, while continuing to hollow out the city’s tax base.
That’s not the only problem with the suggestion. “We’re still working on what defines a robot and what defines job displacement,” Kim admitted in an interview with Wired. “Announcing the opening of the campaign committee is going to also allow us to have discussions throughout the state in terms of what the actual measure would look like.” Kim is, in fact, fairly philosophical about the outcome of her initiative, seeing it more as a conversation starter about how to prepare for the future than a hard-and-fast plan.
I’m guessing it will influence anyone who was thinking of opening a business in San Francisco, and even California. Will Tesla keep building cars in the valley if a new tax is going to be added, or will they move to Nevada?
In reality, it’s not clear what the best way to impose taxes on automation is. Earlier this year, the Economist weighed what such a thing might look like. Taxing capital investment in robots or the increased profits as a result of their installation, the two obvious ways to go about it, don’t seem to be a perfect solution, according to the magazine’s analysis.
Taxing investment is a good way to make sure it doesn’t happen. Taxing the return on investment means tax accountants will be busy (the ones who don’t lose their jobs when their clients relocate elsewhere) coming up with ways to hide those profits.
There are other ways to tackle the problem that don’t focus on the machines, though: reducing tax on human labor, perhaps, or aggressively taxing the world’s most successful firms that make best use of automation. But it’s still unclear which would work best. Maybe initiatives like Kim’s will spur the kind of thinking required to get to the bottom of the problem.
Reducing income tax is a great idea; make sure you reduce government spending while you’re at it. Aggressively taxing the most successful firms, on the other hand, is a great way to make sure that you don’t have the most successful firms. Either they will flee, or you aggressive taxation will make them noncompetitive and they will die. I certainly hope Kim’s kind of thinking is more rational than this article.