Should We Have A Robot Tax? Part 2

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In the second part of a two-episode series, Orly Mazur of the SMU Dedman School of Law discusses the tax implications of increasing automation and his thoughts on robot tax alternatives.

This transcript has been edited for length and clarity.

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David D Stewart: Welcome to the podcast. I’m David Stewart, Editor-in-Chief Tax Notes Today International, This week: I, The Taxpayer – Part 2.

We are continuing our discussion from last week on the pros and cons of taxing robots. first part This series focuses on the arguments for the taxation of robots with Ryan Abbott, a professor at the University of Surrey. This episode, Part 2, will explore the arguments against a robot tax with Professor Orly Mazur. For those interested in the background on the taxation of robots, see Part 1 of this series.

i’m in again tax notes Assistant Editor Mary Sapiri. Mary, welcome back to the podcast.

Mary Sapiri: Thanks again.

David D Stewart: Before we get to this week’s interview, can you give the listener a recap of your interview with Ryan Abbott on the pros of taxing robots?

Mary Sapiri: The main purpose of the robot tax is to address the potential mass unemployment that rapid automation could cause. The idea is that a robot could help raise tax revenue that may be lost due to a reduction in the collection of employment taxes, or income taxes.

David D Stewart: Now, you recently talked to someone with a different perspective on robot taxation. Can you tell us about your guest and what you talked about?

Mary Sapiri: I spoke with Orli Mazur, professor of tax law at Southern Methodist University. He has an extensive background in tax law and technology, international and comparative taxation, and taxation of the digital economy. two years ago, she was also the subject of one of my back storiesin which you can find tax notes,

Orly and I talked about the basis for robot tax proposals, the reasons why they may not be the right solution to the problem identified, and alternatives.

David D Stewart: Okay. Let’s go to that interview.

Mary Sapiri: Thank you, Orly, for joining me today to discuss the tax policy options that lie ahead in an increasingly automated economy.

Orly Mazur: Thanks for having me. I’m so excited to be here today and talk about robots and what we should be doing about them.

Mary Sapiri: You’ve been thinking about, and writing about, this topic for some time, including in the 2018 article “Taxing the Robots”.

To get us started, would you mind explaining what is meant by the term “robot tax” and what is the problem that the robot tax concept tries to solve?

Orly Mazur: Sure. A robot tax, sometimes called an automation tax, is really just a tax on companies that are using robots or other automation technologies that are displacing human workers. In recent years, we have made great strides in robotics and technologies, so we have seen robots start to take over human jobs. We’ve seen it a long time ago: assembly lines, customer service, grocery checkouts.

But now, in recent years, we’ve seen these robots take over jobs that were previously reserved for highly skilled, college-educated, white-collar workers. Things like lawyers, doctors, journalists. People are getting scared.

They are scared that there is going to be massive tech unemployment and everyone is going to lose their jobs. Then there is the fear that inequality will increase, as human workers are now competing with robots for jobs, so they will either receive low wages or no wages.

Then there is the fear that there is going to be a huge loss of government revenue, because robots are not paying taxes and income generated by robots is subject to much less tax than income generated by labor income, and governments now have to spend There is more money to support these displaced workers. Because of these concerns, one possible solution that keeps getting attention in the media is, “Well, let’s just tax robots.”

This has been proposed many times around the world, and the proposals vary, but many of them are simply trying to impose additional taxes on the workers’ owners. For example, we’ll give the robots a hypothetical taxable salary, or perhaps we’ll look at the ratio of sales revenue to the number of employees to see how much automation is happening and then scale the business based on that ratio. subject to tax.

On the other end of the spectrum, some are suggesting, “Well, let’s just tax robots. Let’s treat them as taxable persons and make them pay income taxes and payroll taxes.” But even though these proposals are different, they are essentially trying to do the same thing. They are all trying to address the threats posed by robots disrupting the labor market.

They are generally trying to slow down the pace of automation and save people’s jobs. They are trying to prevent government revenue from shrinking so fast, and then use any additional revenue generated to either help with inequality or help the unemployed. In some cases, these proposals seek to level the playing field by taxing robots more heavily than the humans they are replacing.

Now, we haven’t really seen a robot tax implemented anywhere – South Korea being the small exception – but we’re hearing more calls for it. This is probably going to become an even bigger concern as we see even more automation.

Mary Sapiri: Widespread automation could lead to employment disruption, which, as you noted, is one of the main impacts that robot tax advocates cite. Would you mind telling us about the research about the possibility of mass unemployment due to technological change, and explain what that says about the need for a robot tax?

Orly Mazur: Sure. One of the main fears is that there will be massive technological unemployment. That’s why there’s a lot of this robot tax discussion. But the claim that there will be massive tech unemployment and everyone will lose their jobs is very controversial. This of course begs the question: If we don’t have mass unemployment, do we even need a robot tax?

On the one hand, there are studies that support claims that there will be massive unemployment. For example, there are experts who have conducted studies that suggest that up to 30 percent of hours worked globally could be automated by 2030.

Then there is another study that is often cited in this area which says that 47 percent of the total US jobs will be displaced by robots. These are scary numbers. These studies are basically arguing, “Well, this technological revolution is different than previous ones where we didn’t see mass unemployment. Because here, all sectors of the economy are potentially affected. Jobs can take over, and this technological advancement is happening much faster than other periods where we’ve had these automation revolutions.”

However, there are studies on the other side, which are saying that these studies are wrong. Instead, automation will either result in no overall job losses, or perhaps it will even create new jobs at the end of the day. There is recent evidence showing that the most automating countries had predominantly low unemployment rates, which leads you to think that perhaps automation isn’t hurting employment. Then there is other evidence that indicates that employment has increased in almost all occupations despite this new automation.

In reality, though, I’d say that the estimated number of jobs is going to vary widely by study, industry, and country. No one can say for sure what the future holds. We really don’t know whether robots will take over all our jobs. But everyone agrees that robots are going to significantly disrupt the labor market, at least in the short term.

We still have the problem of labor market disruption, even if it is not as widespread as robot tax proponents say. It is this threat of labor market disruption that we need to address. I think robot tax is not the way to do it.

Mary Sapiri: What are some other reasons for not adopting Robot Tax?

Orly Mazur: One of the main concerns raised by the robot tax is that it will stifle innovation. We know that robotics creates many benefits for society, and if we tax robots, we are increasing the cost of robots, and this may reduce the incentive for companies to innovate and invest in robotics.

It’s never a good idea to punish technological progress. Technological progress is great. It improves our productivity and our GDP, it provides more employment, and provides a lot of benefits to the society. If we penalize it, we are taking away many of these economic and social benefits that robots provide. At the end of the day, we will exacerbate the problems Robot Tax is trying to address.

The picture looks even worse when you take international tax competition into account, because if you have one nation taxing robots and another either not taxing robots or encouraging investment in robots, then Businesses can move abroad. Now we are pushing for more investment overseas and more jobs going overseas, this robot is causing more problems than the tax.

Another major issue with the proposed robot taxes is that designing and implementing and administering these taxes creates a lot of practical issues. At a starting point to make this work, we have to define, “Okay, what is a robot for these tax purposes?” It’s more complicated than it seems.

Is it some kind of machine that replaces human job with automation?…

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