Bill Gates has suggested that in response to robots taking the jobs of humans, there should be a robot tax. As a tax lawyer who builds artificial intelligence (and known as the Taxinator), of course I am going to have some comments.
His line of reasoning is that a “human worker who does, say, $50,000 work of work in a factory […] 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 the same level”
If you imagine C3-PO nudging a human out of their job on a production line, or driving a long haul truck, it almost sounds reasonable: why miss out on those tax dollars?
Here’s Why is it is a Bad Idea
Robots are not Humanoid
It is nice to think of robots as humanoid looking and thinking creations. Like a dorky person who is good at maths or heavy lifting but talks a bit strange: HAL, the Terminator, Robbie the Robot et al. But actually, it is really hard for robots to replicate or imitate humans. It is much easier for them to exist in a simpler world, with different modes of interaction.
A robot is most probably just an arm, or smart remote control car, or a single function piece of clever machinery attached to some other machinery. Not something that occupies the same space as a human does. So while we can easily differentiate between humans, do the following constitute one robot or many:
- 50 robot arms over a conveyer belt?
- A warehouse full of wheeled robots that work together retrieve items (i.e. operable only in conjunction with each other)?
- An AI that operates via a distributed blockchain system?
- R2-D2 and BB-8 welded together (after a bad crash)?
Put simply, a robot or an AI is not a worker. It is a piece of technological equipment just like your laptop, your car or your email account. While those things may reduce the demand for typists, farriers, and carrier pigeon trainers, it doesn’t make sense to attempt to conceive of them as standing in the place of a human. This means that you cannot tax robots or AI separately as you do humans.
It is a Distortionary Tax Idea
You could probably tax robots if you levied a tax on expenditure on advanced plant and equipment, or advanced intelligent systems. So instead of trying to work out where one robot starts and another finishes, you instead tax gross capital expenditure on robots.
Firstly, how do you determine whether a program constitutes an AI or not? This is something that people often disagree on. Do you tax the robot in the Ford factory that replaced the brutish guy who used to lift the cars up so people could inspect underneath? (Seriously, I met a guy who used do that as a job). Or just the ones that can beat humans at board games? Even if you could get a working definition, you are going to incentivise businesses to use older, worse, more inefficient technology. Like taxing people if they upgrade from a Commodore 64.
Secondly, this is the exact opposite of how the tax system works. Capital expenditure is either a deduction against your income, or is depreciated over the life of the item. It is an expense, that is used up over time to generate wealth, rather than a source of wealth in of itself. While it is common in tax systems to tax wealth (such as houses, shares, money) the things that you expend and use in creating that wealth are deducted against income received. You simply don’t tax your pen, your tool-belt or forklift as items of wealth — they are expenses.
You Aren’t Missing out on Tax
Human workers pay tax on their income. If you no longer have to employ a human to perform that job, that money doesn’t escape taxation — it gets taxed in the hands of the business that would have employed them. In the last 100 years employment on farms has gone from 30% of the workforce to 3% as the result of technological change. If we were missing out on tax, we would have expected the amount of tax collected to massively decrease over that time. Instead, we have seen the exact opposite, because:
- The business owner gets taxed on profits from machines; and
- The worker works in another job and gets taxed on their income there.
Result: increased wealth throughout the economy and increased tax revenue.
Right Problem, Wrong Answer
For centuries humans have worried that when a task is made more efficient by technology that they will have nothing to do. But yet every time a newer, better job is created. The people who lost jobs to mechanical looms had children who lost their jobs to mechanical ploughs, whose children lost their jobs to railroads, whose children lost their jobs to flushing toilets, whose children lost their jobs to valve circuitry. Something new has always come up for humans, although it is of often scary because we can never predict what exactly what that next job will be. But would you wish on your children a job like yours or better? Or would you wish for them to be hand-weavers, plough draggers, cart drivers, night-soilmen, or morse-key operators?
But perhaps you really believe that this time (unlike every other time in human history) there will be a proportion of people who will not have a new job to work in (noting that each previous time people have thought that there would be nothing new for them to do). Then your answer is not on the tax side, but on the payment side. Under a scenario of mass unemployment due to technology an logical answer is a Universal Basic Income. And to fund that perhaps start with removing existing inefficiencies and complexities in the tax system before implementing more.
Why it is Scary
There is actually an existing way of taxing artificial entities: by treating them as a separate legal persons. Hence companies are treated as a separate legal person, owning property in their own right, and being taxed on their own income. And we can and do extend the concept of legal person-hood further: e.g. in parts of India a religious shrine (which may consist of little more than a pile of rocks) can be given separate legal person-hood. It follows that we could give separate legal identity to robots.
Here are some scary legal issues to deal with if you granted robots legal person-hood:
- If I kick your Roomba is that assault?
- Companies have directors, is there a robot equivalent (e.g. creator)?
- Who owns a robot built by a robot?
- If a self-driving car crashes, do you send it to jail, or for maintenance?
- Can you marry a sex-bot?
- Tax rates are progressive, so a million chatbots that earn $10,000 each, together pay less tax than Apple. But can they claim unemployment benefits if no-one uses them for a while?
Adrian is the Creator of Ailira, the Artificial Intelligence that automates legal advice and research, and the Principal of Cartland Law, a firm that specialises in devising novel solutions to complex tax, commercial and technological legal issues and transactions.