Are Robots Going to be Subject to Death and Taxes?

In a 1789 letter, Benjamin Franklin wrote, “Our new Constitution is now established, and has an appearance that promises permanency; but in this world nothing can be said to be certain, except death and taxes.” There is another certainty implied in Franklin’s statement and that certainty is “change.” The business world is now amid a great period of change — a fourth industrial revolution sometimes called Industry 4.0. At the heart of this new revolution are artificial intelligence and robotics. Some pundits are concerned these two technologies are combining to displace human workers at such an alarming rate the end result will be massive unemployment, economic chaos, and social unrest. Other pundits argue that this revolution, like previous ones, will result in more jobs rather than fewer jobs. We just don’t know what those jobs will be because many of the industries that will create them have yet to emerge. Both sides offer cogent arguments for their positions, which makes planning for the future difficult. The only thing that is certain is that change is coming. The question, then, is: How are we going deal with that change?

Bill Gates Recommends Taxing the Robots

“Robots have at least one unfair advantage over human workers,” writes Richard Waters (@RichardWaters), “they do not pay income tax.”[1] He goes on to note, “Bill Gates, co-founder of Microsoft and the world’s richest man, thinks that should change. It is an idea that until now has been associated more with European socialists than tech industry leaders, and puts him in the unusual position of explicitly arguing for taxes to slow the adoption of new technology.” Gates discussed his proposal to tax robots in an interview with Kevin J. Delaney (@delaney).[2] You can listen to Gates’ arguments by clicking on this link. Delaney writes, “Robots are taking human jobs. … Gates said that a robot tax could finance jobs taking care of elderly people or working with kids in schools, for which needs are unmet and to which humans are particularly well suited. He argues that governments must oversee such programs rather than relying on businesses, in order to redirect the jobs to help people with lower incomes. The idea is not totally theoretical: EU lawmakers considered a proposal to tax robot owners to pay for training for workers who lose their jobs, though on Feb. 16 the legislators ultimately rejected it.” He continues:

“‘You ought to be willing to raise the tax level and even slow down the speed’ of automation, Gates argues. That’s because the technology and business cases for replacing humans in a wide range of jobs are arriving simultaneously, and it’s important to be able to manage that displacement. ‘You cross the threshold of job replacement of certain activities all sort of at once,’ Gates says, citing warehouse work and driving as some of the job categories that in the next 20 years will have robots doing them.”

I believe Gates is correct about the need to manage job displacement challenges. Frankly, though, I’m a bit skeptical that most displaced workers would be a good fit for jobs caring for the elderly or teaching children — even with retraining. I do believe, however, that retraining and reskilling of the workforce will be essential in the years ahead. “It is really bad if people overall have more fear about what innovation is going to do than they have enthusiasm,” Gates told Delaney. “That means they won’t shape it for the positive things it can do. And, you know, taxation is certainly a better way to handle it than just banning some elements of it.” Waters notes, “Some tech leaders have hinted that the tech companies’ customers — rather than the industry itself — should foot a higher tax bill.” When Waters interviewed Satya Nadella, chief executive of Microsoft, Nadella told him “the profits from productivity gains for tech companies and their customers could be huge.” He also said “how those should be distributed will become part of the AI debate. “Whenever someone cuts cost, that means, hopefully, a surplus is being created,” Nadella told Waters. “You can always tax surplus — you can always make sure that surplus gets distributed differently.”[3] Commenting on Gates’ tax proposal, Justine Brown (@Justine_Brown) writes, “The robot tax would help balance out workplace displacement and could be a way of putting technology to work in a manner that empowers people and gives them a sense of accomplishment rather than just putting them in the employment line. Either way, automation is coming, so the time to think about how to manage it is now. A recent Forrester report predicted automation supported by intelligent software agents will be on the rise in the next five years, accounting for the elimination of a net 6% of U.S. jobs.”[4]

The point of all this taxation talk is an underlying acknowledgement that there needs to be a safety net provided for displaced workers while the whole automation picture works itself out. Some analysts who believe displacement is going to be permanent — because not enough jobs will be created for full employment — argue for a universal basic income (UBI). Peter Diamandis (@PeterDiamandis), Co-Founder and Vice Chairman at Human Longevity, Inc., is one those analysts who believes UBI is worth considering. He writes, “While the implementation of UBI at scale is still in its early days, the results are promising. Early results in the India experiment show nutrition was improved as measured by the average weight-for-age of young children (World Health Organization z-score), and more so among girls. In the same study, the UBI grants led to more labor and work, not less, as expected by skeptics. There was a shift from casual wage labor to more self-employed farming and business activity, with less distress-driven migration out of the region. Women gained more than men. … I’m fairly confident that in the near future, as technology continues to eliminate traditional jobs and massive new wealth gets created, we’re going to see some version of universal basic income deployed at scale. While I think the implications of UBI are mostly positive, there are certainly many complexities associated with its rollout.”[5] For a different perspective on that topic, read my article entitled “Jobs Sustainability, not Universal Basic Income, is the Answer to Automation.”

John Thornhill (@johnthornhillft) observes that compensating workers displaced by technology is not a new idea and notes that London’s watermen (i.e., people who ferry people across the Thames), have been receiving compensation from the construction of new bridges since the 16th century.[6] He goes to write, “The twin forces of globalisation and technological upheaval are rendering many traditional jobs in developed countries obsolete, just as the watermen’s trade disappeared in earlier times. Although both these forces bring much generalised gain, they also result in localised pain. That pain has been identified by some politicians as the cause of the electoral convulsions that led to the pro-Brexit vote in Britain and the triumph of Donald Trump in the US presidential elections. … However that plays out, it is hard to avoid the conclusion that sooner or later, for the sake of social stability, we are going to have to figure out smarter ways to compensate the ferrymen.”

Taxing Robots is not a Good Idea Says Lawrence Summers

Lawrence Summers (@LHSummers), Charles W. Eliot Professor and President Emeritus at Harvard and a former U.S. Treasury Secretary, indicates he normally agrees with Gates on public policy. Recently, however, he wrote, “I think [Gates] went seriously astray in a recent interview when he proposed, without apparent irony, a tax on robots to cushion worker dislocation and limit inequality. The Microsoft co-founder is right about the gravity of the problem and need for action, but he is profoundly misguided in his proposed solution — and in ways that point up problems with the current public debate.”[7] He adds, “There are many kinds of innovation that allow the production of more or better output with less labour input. Why pick on robots? Does Mr Gates think anyone, let alone the US Congress, the Trump administration or a commission comprised of his fellow technocrats, can distinguish labour-saving activities from labour-enhancing ones?” He goes on to argue, “Much innovative activity, even of a robot-like variety, involves producing better goods and services rather than simply extracting more output from the same input. … Surely it would be better for society to instead enjoy the extra output and establish suitable taxes and transfers to protect displaced workers? It is hard to see why shrinking the pie, rather than enlarging it as much as possible and then redistributing, is the right way forward.” Discussions about redistributing wealth bring lots of baggage with them. Summers’ big concern is that “Gates’ robot tax risks essentially being protectionism against progress.” He continues:

“None of this is to minimise the problem of job destruction and rising inequality (although it is a major paradox that we seem to be seeing unprecedentedly rapid job destruction by machinery while at the same time observing extraordinarily low productivity growth). Rather, it is to suggest that staving off progress is a poor strategy for helping less-fortunate workers. In addition to difficulties of definition and collateral costs, there is the further problem that in an open world, taxes on technology are likely to drive production offshore rather than create jobs at home.”

Summers favors government programs that encourage education and training as well as job creation programs. He explains: “Among other things, this will mean major reforms of education and retraining systems, consideration of targeted wage subsidies for groups with particularly severe employment problems, major investments in infrastructure and, possibly, direct public employment programmes. This will be a major debate that I suspect will define a large part of the politics of the industrial world over the next decade. Little is certain. But we will do better going forward than backward. That means making America even greater, not great again. And it means embracing rather than rejecting technological progress.” Kit Cox (@KitCoxEnate), CEO at Enate, agrees with Summers that robot taxes are not the answer. His suggestion is robot licenses.[8] He explains:

“Robot Licenses should be distributed to the workforce, and by this I mean anybody of working age, like a National Insurance number. Each person has a robot, licenced to their own person. These licences can then be traded on an open, transparent and regulated market. If, for example, I want to sell a service or product that is delivered or built by robots, then I need to have licenses for those robots. So if I want to use three robots, I need to lease those licenses from three humans, and pay those people for the period of time that I use those robots. This would mean those that wanted to safeguard their own positions could do so, while those who required robotic assistance could shop around, find the best deal and pay a fair and going rate to acquire the skills they need. While it’s far too early to quantify rates, this approach empowers and puts money back into the pockets of ‘the people’. … Gates is right about the need to provide funds to retrain workers and to support them in making these job transitions, but taxing robots will just slow job creation. Automation is creating more jobs than it is destroying and there are better ways than taxing robots to help humans avoid the pitfalls of automation. Instead of slowing innovation, the government should think about taxing humans less and redistributing the income of robots more.”

Interesting ideas; but, only the future will tell which ideas will eventually catch on.

Summary

Change is constant and automation and artificial intelligence are major drivers of change. There is a clear consensus that workers are going to be displaced by technological advances. What is not clear is how to prevent those displacements from creating massive unemployment, social unrest, and economic chaos. I side with pundits who believe new jobs are on the way; but, workers are going to have to retrained and reskilled to fill those jobs. Programs to accomplish that are not going to be free and who should pay the bill has yet to be decided. Should robots pay their fair share? Gates thinks they should and Summers think we should look elsewhere for funding. My suspicion is that both public and private funds will eventually be involved. Jobs sustainability offers a much better future than one involving little or no human labor. I wonder what Ben Franklin would make of all this?

Footnotes
[1] Richard Waters, “Bill Gates calls for income tax on robots,” Financial Times, 19 February 2017.
[2] Kevin J. Delaney, “The robot that takes your job should pay taxes, says Bill Gates,” Quartz, 17 February 2017.
[3] Richard Waters, “Frankenstein fears hang over AI,” Financial Times, 16 February 2017.
[4] Justine Brown, “Bill Gates: ‘Robot tax’ could help train human workers for new jobs,” CIO Dive, 21 February 2017.
[5] Peter Diamandis, “Is Universal Basic Income the Answer to an Automated Future?” LinkedIn, 12 December 2016.
[6] John Thornhill, “When robots take jobs, workers deserve compensation,” Financial Times, 27 December 2017.
[7] Lawrence Summers, “Robots are wealth creators and taxing them is illogical,” Financial Times, 5 March 2017.
[8] Kit Cox, “There’s a Better Approach than Robot Tax,” Computer Business Review, 9 March 2017.

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