In a recent interview with news website “Quartz,” Bill Gates offered a rather unconventional approach to the growing use of robots in factories, asserting that robots who replace human workers should incur the same tax rates as the human workers’ income taxes would have incurred.
According to Gates, “Right now, the human worker who does, say, $50,000 worth of work in a factory, that income is taxed and you get income tax, social security tax, all those things. If a robot comes in to do the same thing, you’d think that we’d tax the robot at a similar level.”
Gates proposed that taxing robots could help slow the rate of automation and the replacement of human workers, funding other types of employment in the process. The danger of automation lies in the fact that the displacement of human workers will exacerbate income inequality in the United States.
Gates offered two compelling points to back up this controversial argument. First, that the automation of production will soon become dominant and will eventually be the main source of worker displacement. He proposed that market forces alone will not be enough to sustain the wellbeing of society, especially if increasingly more people are unemployed. Taxation on robots is the most appropriate approach to this inevitable transition. Second, Gates asserts that the overall perception of technology replacement has been a negative one, and if technology replacement continues its fast encroachment in the manufacturing industries neither the producers nor the workers will be pleased. The fear of innovation and change is nothing new, and according to Gates it’s not necessarily a bad thing to actively limit change that has the potential to have negative consequences. In short, Gates believes that government intervention through taxation is necessary, because while automation benefits companies through more efficient and cheaper labor, workers suffer the consequences.
However, this proposal for more taxation within the manufacturing industry raises concerns about where to draw the line when it comes to governmental intervention. Gates seems to have mistaken production tax for income tax. Although robots do the same work that human workers do, robots do not earn any income. The tax imposed on robots is tax on production. On the other hand, the government can tax the income of the worker through income tax and the consumption of the worker through sales tax, but they have never imposed a production tax on humans. The logic is simple: a tax on production can easily become a disincentivizing factor that reduces productivity and impedes growth.
Moreover, defining which machines are replacing humans and which machines are necessary for production is far too complicated. In an era where there are word generators that write news articles, self-checkout machines at every big chain store and artificial intelligence machines that detect fraud in transactions, how do we decide which “robots” should be taxed? The task of deciding the definition for “taxable robots” alone represents potential government interference in the economy.
Humans are generally apt with resource allocation. When there are too few unskilled job opportunities in manufacturing sectors, people will opt to work in other sectors that require a higher level of human creativity. Automation can mean that humans are freed of strenuous labor and can pursue careers that require critical thinking and meaningful human interaction.
Gates’ proposal to tax robots is a valuable idea that has sparked conversation and further consideration of what rapid automation could mean for human welfare and the economy. However, the idea itself could pose many underlying dangers regarding governmental control of the economy.
Perhaps there is another way to look at our current rate of “technological unemployment,” a positive view of automation that John Maynard Keynes offers in his article “Economic Possibilities for our Grandchildren (1930).” When robots and machines are the main labor force in the manufacturing sectors, humans will have leisure time that they can spend on pursuing activities that are intellectually and mentally fulfilling such as writing novels, enjoying meaningful human interactions and exploring the world.
The adoption of machines in production is nothing new. Throughout history, humankind has observed horses replaced by cars, the introduction of steam power and the revolution of the textile industry. Automation can provide humans with more opportunities to pursue their dreams with fewer obstacles such as the need to make money, a luxury that many cannot afford.
Jenny Dao ’17 (firstname.lastname@example.org) is from Vung Tao, Vietnam. She majors in economics and political science.