The New York Times article “Don’t Fight the Robots. Tax Them.” discusses the current and future states of automation. Automation is a hot topic, because it’s increasingly common and increasingly threatening jobs. The benefits of automation supposedly come in the form of increased productivity, but that isn’t always the case. Despite rapidly increasing automation, productivity growth is slow, both in the US and around the world in other developed countries. The reason for the divide falls on the tax code; even if robotics and automation offer no productivity or quality advantage, they can still be a good investment for the company, because of tax subsidies to support automation. These tax subsidies have two main forms in the US: for one, 1/3rd of all tax dollars collected by the federal government are payroll taxes on employers, which can be reduced by firing employees and replacing them with automation for which the company doesn’t need to pay taxes. The second way automation is subsidized is by tax laws allowing investments in robotics to be depreciated faster than wages. These tax laws need to be changed to encourage companies to automate when it provides business value, and not just to save on taxes.
So far, South Korea is the only country to impose any sort of tax on robotics, in the form of reducing tax deductions from investments in automation. The EU and US have rejected similar laws. Changing these tax laws would be hugely beneficial to the American people, because on top of the 33% of taxes that come from payroll taxes on employers, 50% of the federal government’s tax revenue comes from income tax. That means that as more of the labor market is replaced by automation, government tax revenue will fall, while the demand for government services will increase with unemployment and underemployment. Until tax laws are changed, American workers will continue to lose jobs to robots, and the federal government will have less and less money to support its citizens.