Do robots deserve a tax? Everything you need to know

According to a study, a robot tax, even a small one, might aid in the fight against the negative impacts of automation on economic inequality in the United States.

What if robots were subject to a tax in the US? Policy experts, academics, and Bill Gates have all openly debated the idea (who favors the notion). According to the theory, since robots have the potential to replace employment, a high tax on them would encourage businesses to support employee retention while also making up for a reduction in payroll taxes when robots are employed. South Korea has so far lowered incentives for businesses to use robots; in contrast, European Union policymakers contemplated a robot tax but decided against enacting it.

Now, research by MIT economists examines the available data and contends that a modest robot tax would be the best course of action in this case. The same holds true for trade levies that would also result in fewer American jobs, according to the study.

Arnaud Costinot believes that "our study postulates that taxes on either robots or foreign goods should be very minor." "Robots nevertheless result in moderate, optimal taxes, despite their impact on income inequality."

According to the report, trade taxes should be between 0.03 percent and 0.11 percent, given current U.S. income taxes, while a tax on robots should be between 1 percent and 3.7 percent of their worth.

The other co-author of the paper and an economist at MIT, Iván Werning, admits, "We started into this not knowing what would happen. In order to reduce inequality by halting technology or commerce, "we had all the potential elements for this to be a significant tax," but "for now, we propose a tax in the one-digit range, and for trade, even lower taxes."

Costinot and Werning used this empirical study as well as others in their policy analysis. They created a model to assess various possibilities, and they included other tools like income taxes as a way to deal with income inequality.

Though they're not ideal, Werning argues, "We do have these additional tools for dealing with inequality." We believe that talking about taxes on trade and robots as if those were our only weapons for redistribution is erroneous.

To assess the necessity for robot and trade taxes, the researchers explicitly analyzed wage distribution data from each of the U.S.'s five income quintiles. Empirical evidence suggests that trade and technology have altered the pay distribution, and the size of this alteration contributed to the creation of the robot and trade tax estimates proposed by Costinot and Werning. The simplicity of this approach allows economists to avoid creating models that make too many assumptions, such as the precise role that automation might play in the workplace.

The relationship between salaries and taxes can be drawn, according to Werning, "when we are methodologically pioneering, without making super-particular assertions about technology and about the nature of production." "That distributional effect has all of it encoded. We have high expectations for that empirical research. However, we don't make untestable assumptions about the rest of the economy."

If you are comfortable with some high-level assumptions about how markets function, Costinot continues, "We can tell you that the only subjects of interest driving the optimum solution on robots or Chinese goods should be these reactions of wages across deciles of the income distribution, which, fortunately for us, people have tried to approximate."