Bill Gates's robot tax idea is flawed. Here's why.
© Getty Images

Recently, a spate of stories have appeared in the media speculating that advances in technology, specifically robotics and artificial intelligence, will inevitably lead to widespread job losses as workers are replaced by machines.

Naturally, many commentators have suggested policy solutions to address this issue. Perhaps attracting the most attention was Bill Gate’s assertion in a recent interview that robots should be taxed in the same way as human workers.

ADVERTISEMENT
There are several key problems with this proposal. First, it would be very difficult to define exactly what a robot is and, thus, how it should be taxed.

 

Second, currently, industries are struggling to improve productivity. Discouraging innovation in such an environment seems foolhardy. Finally, if the United States experiences a manufacturing renaissance, automation technologies will be a key enabler.

In his comments, Gates was likely addressing automation in general rather than robots specifically. Automation technology takes many forms, such as 3D printers, storage and retrieval systems, milling machines and the traditional industrial robotic arms that are prevalent in automobile production.

Essentially, these are systems that improve industrial efficiency. Practically implementing a robot tax would be extremely difficult and fraught with arguments over what defines a robot.

Additionally, the improvements in efficiency resulting from investments in automation would lead to greater profitability and thus, higher taxes on those profits. In any case, taxing efficiency is counterproductive for other reasons.

Recent economic data does not support the idea that we are in the midst of a massive acceleration in technological disruption. The current economic expansion has been characterized by slow GDP growth. Perhaps more importantly, productivity growth (output per worker) has been sluggish for several years.

In this environment, many industrial firms are struggling to match the growth rates of the past. For such firms, upgrading equipment is necessary to remain competitive, and automation and robotics could offer compelling solutions.

Amazon, for example, has leveraged investments in robotics, machine vision, and warehouse automation to improve the shopping experience for millions of consumers.

Taxing investment on automation equipment would decrease the projected return on investment for new projects that utilize these technologies. Companies should be encouraged to invest in innovative technology rather than discouraged by a robot tax.  

In addition, the desire has been expressed from across the political spectrum to restore the United States as a global leader in manufacturing and industrial production. The realities of the global marketplace dictate that any such effort will require sustained investment in advanced technology.

The rebirth of American manufacturing will not be possible without a heavy investment in automation and robotics by American-based firms. Taxes imposed on robots or other industrial equipment would impair the ability of U.S. companies to advance and compete globally. This would likely delay or inhibit any industrial renaissance in this country.

It is certain that some jobs will be displaced by emerging technologies, but we should not fear or prevent progress. Policies that address disruptions to employment and social inequality may very well be necessary.

Yet, taxing efficiency and innovation is the wrong approach. These taxes would likely lead to reduced economic growth and would impair the ability of U.S. companies to compete in global markets.

 

Spencer Smith is director of research at Chevy Chase Trust, an investment and wealth management firm based in Bethesda, Maryland.


The views expressed by contributors are their own and not the views of The Hill.