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It’s Time to Tax the Robots, Not the People

Posted by Bob Warfield on May 20, 2015

I read a fascinating piece on the economic impact self-driving cars and trucks will have and it’s not a pretty sight.  A quick glance at this map showing the most common job in each state makes it clear:

JobsByState

The most common job in each state in 2014…

You don’t have to study the map very long to conclude automating truck driving away as a way of life is going to have a profound effect on our economy.  When you consider that truck drivers make an average of $40,000 a year, which is more than almost half of all tax payers, and you add in all the jobs related to the truck driving industry, it may be one of the biggest impacts we see in our lifetimes.

Can this really happen?  When will it happen?

The article goes on to show that the world’s first driverless truck has already hit the road in Nevada, and was built by Mercedes Benz.  They present estimates from a variety of sources that suggest somewhere between 2020 and 2030 completely autonomous trucks will begin to take over by storm.  Google has demonstrated self-driving vehicles and Teslas have the capability already built in to cars already on the road.

All of the proponents of driverless vehicles are loudly trumpeting that the vehicles are safer, cheaper, and more fuel efficient.  But what they’re not considering is the impact on the economy.  What will all the truck drivers that lose their jobs do to earn a living?  Who will benefit?

As it stands, large organizations that can afford to buy driverless vehicles will be the beneficiaries and nobody has a plan for what will happen to the truck drivers.

This looks like the third tranche of job-destroying disruption.  The other two–the destruction of Retail jobs first by firms like Walmart and later by the Internet, and the Offshoring and Automation of Manufacturing jobs, are well underway.  The economy is still limping in the wake of the Great Recession, and it’s tough to say we’re out of the woods except for the most dyed in the wool political supporters who want to claim victory for their side.  Meanwhile, Main Street America is braced and wondering what the next big shock to the Middle Class will be.

The article argues its time to get some sort of Basic Income plan in place to provide a Safety Net.  Safety Nets are fine, but I want to know how the Middle Class can do better than a Safety Net.  A vibrant Middle Class does not sit at home waiting for its next Government Safety Net check to do something.  A vibrant Middle Class has hopes, dreams, and upward mobility. Those are all things a Safety Net can’t cover–only Opportunity can provide hope or fulfill dreams.

It’s time to start Taxing the Robots, Not the People.

If the Robots are going to take over more and more of the economy to the detriment of the People and the benefit of those few who can own thousands of Robots, why not tax the Robots?  In fact, why not look at any practice that wholesale destroys lots of jobs as being worthy of taxes to pay for programs to help those who’ve been displaced?

If we look at it that way, there are several areas to think about applying progressive taxes:

–  Taxes on automation and robots

–  Taxes on offshoring jobs

–  Taxes on monopolies that take over markets and then use their unfair influence to gut jobs by destroying all competition

These taxes will automatically be progressive.  They will help balance the playing field so that progress can still come, but there are costs that result in funds to help those displaced by progress.  We don’t want to eliminate the progress, we just want to even out some of the unfairness that comes when we let progress run completely roughshod.

So far, we’ve done very much the opposite, which is part of our problem.  Our system makes hiring more expensive not less.  However good its intentions, Obamacare is a net job reducer because businesses have to pay for it based on how many employees they have.  What if instead they paid based on how many robots, or on how many jobs they had offshored?

There’s been such a massive transfer of wealth that clearly there is money to pay for such programs.  Much more than enough.  While we’re at it, we should be exempting smaller businesses from such programs.  It’s been well proven that Small Businesses are the engines of job creation and growth.  As a nation, we’re sold on the idea of more and more progressive taxes for people, but we have left off progressive taxes for businesses.

We have a tax system that allows 43% of Americans to pay no Federal Income Tax.  Why not a system that allows the smallest 43% of businesses to pay no taxes?  That would dramatically level the playing field and re-ignite Small Business growth.

So, in a nutshell, what we could do to offset a continuing economic disaster for the Middle Class would be:

1.  Tax Robots, Offshoring, and Monopolies so that organizations involved with these practices have the highest tax rates

2.  Radically lower taxes for Small Business.  Some meaningful fraction of them shouldn’t have to pay taxes at all.  Perhaps not 43%, but certainly the 20% or so smallest business.  Make up that lost revenue by increased taxes on larger businesses.

3.  Make #1 and #2 net positive tax revenue generators to allow for new programs.

4.  Put a solid Safety Net in place.

5.  Stimulate the Small Business economy with what’s left.  In addition to Radically Lower Small Business Taxes, we should increase the availability of Small Business Loans and we should make Education cheaper.  The latter will make it easier for those whose jobs were automated away to retrain as well as ensuring an increasing pool of talented labor.

The biggest obstacle in all this thinking is that currently, the people calling the shots in terms of lobbying and poltiical contributions are precisely the ones we propose to have pay for these new programs with new taxes.

How will we ever break out of that cycle?

2 Responses to “It’s Time to Tax the Robots, Not the People”

  1. NM said

    Very thought provoking (as usual), Bob!

    Unfortunately, I don’t see your plan ever seeing full light of day. The reasoning is this: if robots are affordable by wealthier people / companies, then taxing robots (vs people) means taxing the wealthier class. But money and politics are inextricably linked and therefore it seems unlikely that a Robot – Tax will ever see light of day. Unfortunately.

    Nimish Mehta

  2. Yep, essentially my point at the end of the article.

    I recently came across this article which is about Princeton and Northwestern researchers proving we have no statistically significant influence on Congress:

    http://www.upworthy.com/20-years-of-data-reveals-that-congress-doesnt-care-what-you-think

    Pretty depressing and it’s true of both parties. Our most pressing problem is likely fixing that issue ahead of all others.

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