If Robots Steal Our Jobs, Maybe We Should Make Them Pay Tax

Walk into this San Francisco restaurant and you are greeted with a wall of numbered cubbyholes with acrylic doors. Dotted around the room are tablet screens for placing orders. What you won’t find are any people serving. There’s no counter, no human to take your order or hand over the food. Instead, customers scroll through the menu of quinoa and rice bowls on the in-store screens or on a mobile app, tap in their order and wait for their name to flash on one of the cubbies, where their food will be waiting.

This is Eatsa , an automated restaurant. Well, sort of. There are still humans preparing food behind the scenes. But the company hopes to eventually automate this process too.   

The concept restaurant, while it has had recent setbacks , represents another step in the onward march of automation. To some, Eatsa is a sign of innovation, providing people with fast, smooth service without the need to speak to another person. But for others, like San Francisco Supervisor Jane Kim , who represents the district the restaurant is in, “there’s a big question mark about what this means for us as a society,” she says. Not only what it means to have less human interaction but also what it will do to jobs.

Automation has been on Kim’s mind. “This is one of the biggest issues that is facing our country over the next decade,” she says. In response to her growing concerns about how it will play out in a city with one of the fastest-growing income gaps between rich and poor , she had an idea. Tax the robots and use the money to help stem inequality.

The idea of a robot tax has bubbled up over the past couple of years, thanks to the backing of some high-profile figures, proposing it as a way of trying to prevent all the benefits of automation from flowing to a tiny slice of wealthy people.

Benoît Hamon — a socialist candidate in the French presidential elections last year — made a robot tax a plank in his campaign . Perhaps the most famous advocate is Microsoft billionaire Bill Gates. He told Quartz last year,  “Right now, the human worker who does, say, $50,000 worth of work in a factory, that income 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 a similar level.”

He says he believes taxing machines could slow the pace of automation, giving people a chance to retrain and giving governments time to put in place policies to protect people from intensifying inequality.

A robot tax has not been implemented anywhere. The European Parliament toyed with the idea but ultimately rejected it, concerned it would amount to a tax on progress and put the EU at a disadvantage. South Korea has probably come closest . With the aim of protecting workers, it implemented a halfway step last year by cutting a tax break available to companies investing in automation. 

In San Francisco, Kim’s suggestion is to extend the payroll tax to robots and algorithms that replace human jobs. Funds raised would be funneled into a “jobs for the future fund,” she says, which could pay for “workforce development and training for workers who have lost their jobs, such as truck drivers, retail and restaurant workers, even accountants and stockbrokers.”  

She also envisages using the tax revenue to tackle the low pay of many care sector jobs. “We do have these jobs which are very difficult to automate like child care and home support service workers that are currently jobs largely performed by older women of color.”

A February report from global management consultancy Bain & Co. supports Kim’s concerns about inequality. It found that the most vulnerable in society will be hardest hit by automation. It predicted up to 25 percent of American jobs will be eliminated by the end of the 2020s — equal to 40 million workers — and depressing the wages of many more.

“Today’s level of inequality already has prompted growing public concern and debate,” the report says. “It seems reasonable to expect that at significantly higher levels, popular criticism would intensify and increase pressure for social policies to address it.” Taxing robots is one of the possible interventions mentioned in the report.

However, not everyone is in favor.

A key criticism revolves around the practicalities of implementing the tax. What counts as a robot, for example? While a factory line robot seems clearly to be replacing human workers, what about digital assistants? Or vending machines? 

“There is no such thing as an individual robot, so you would be looking at something like the value created by robots, which is a heck of a difficult thing to define,” says Len Shackleton, an editorial and research fellow at the U.K.-based Institute for Economic Affairs. 

He wrote a paper for the institute  in May that set out why we shouldn’t panic about automation and artificial intelligence. The report criticizes the idea of a robot tax as “ill-judged.”

Automation offers huge benefits to society, he says, “and to try to hold this back with these kind of imagined fears — I call it a moral panic — it has all the classic things of witch hunting. ‘Let’s find the nasty capitalist and burn them at the stake.’”

In addition to the difficulties of applying the tax, Shackleton raises the point that it could not be undertaken in one country alone. “Certainly for any medium-size country like the U.K. to try to do this in isolation would actually be suicidal,” he says. “It would mean that nobody would really consider investing in this country in anything which involved producing goods because virtually anything could be classified as a robot.”

Kim is aware that it would not be a simple task to work out how to tax robots. “I don’t want to deny that there aren’t a host of definitional concerns that we need to tackle before we roll this out,” she says. That’s why she has spoken to a broad coalition of advisers, including big tech companies, to thrash out how a tax could work in practice.

“I think tech wants to be part of the solution. They don’t want to be the bad guys,” says Kim. “They don’t want to be viewed as the guys that took away everyone’s jobs.”

No one is suggesting robot tax is the sole answer to tackling the threat automation poses to inequality, but advocates say it could be a useful weapon in policymakers’ arsenal. Sergio Rebelo, a professor of finance at the Kellogg School of Management who analyzed whether taxing robots could reduce income inequality, concluded that the tax would make sense.

“We find that when robots are relatively expensive, taxing them is useful in terms of improving the distribution of income between routine workers, whose jobs can be automated, and nonroutine workers, who benefit from automation.” But once robots become cheap, it’s no longer a useful mechanism. “At that point, the best policy is to provide a basic universal income financed with income taxes,” he says. 

Of course, a robot tax is not the only or even the highest-profile idea to deal with automation and inequality. A universal basic income, which would give everyone no-strings-attached money, has support from the likes of Elon Musk and Facebook co-founder Chris Hughes. There’s also the idea of guaranteed jobs  — $15 an hour government jobs for anyone who wants or needs one — which has the backing of prominent Democrats, including Sens. Cory Booker (D-N.J.) and Bernie Sanders (I-Vt.).

But, Kim says, these are not revenue-raising schemes. “Everyone has great ideas about how to spend money, but no one is actually proposing how to raise that money.”

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