Bill Gates recently said that Robots should be taxed by the Government to fund human services. This taxation was suggested as a remedy to the growing threat of mass unemployment posed by Robots.

Problems with this ‘Robot Tax’:

It is not possible to define a Robot: Is an Excel Spreadsheet software program a Robot? How about a Cloud Based Voice Analytics program to respond to customer service calls? How about a shovel that can increase the productivity of a laborer? It is not easy to define the thin line between a tool that can increase human productivity and a technology that can make a human redundant.

Is an Excel Spreadsheet software program a Robot? How about a Cloud Based Voice Analytics program to respond to customer service calls? How about a shovel that can increase the productivity of a laborer? It is not easy to define the thin line between a tool that can increase human productivity and a technology that can make a human redundant. People value jobs over welfare schemes: Jobs instill a sense of purpose and psychological fulfillment. Unemployment has a very high psychological cost. Even with generous welfare benefits, people still express preference to work.

Jobs instill a sense of purpose and psychological fulfillment. Unemployment has a very high psychological cost. Even with generous welfare benefits, people still express preference to work. The Government will just get bigger: Giving Government Agencies the power to define what is a Robot and what isn’t creates opportunities for graft and corruption.

Alternate Proposal: Tax Credits for each full-time employee

Suppose the annual minimum wage is $15,ooo. Suppose the corporate tax rate is 25%. If tax credits worth $60,000 are offered for each full-time employee, that would effectively make an entry level employee a zero cost hire.

The profit per employee for the 300 largest corporations (by Market Cap) was around $83,000 in 2005. It is safe to assume that this ratio has risen by now and will continue to rise with advances in Robotics. This tax proposal would create downward pressure on the profit per employee ratio.

Advantages of this tax proposal (besides the obvious one of increasing employment) would be:

A progressive tax system that reduces inequality: Corporate taxes are not ‘progressive’. A reduction in dividends and capital gains hurts rich and poor investors alike. Allowing corporations to reduce their corporate taxes, while simultaneously jacking up the personal tax rates for the wealthy would not impact Government revenue. But, it would be a more progressive tax system that would see the richest pay a lot more in taxes. And apparently, the richest people in US want to see their tax rates raised as well.

Corporate taxes are not ‘progressive’. A reduction in dividends and capital gains hurts rich and poor investors alike. Allowing corporations to reduce their corporate taxes, while simultaneously jacking up the personal tax rates for the wealthy would not impact Government revenue. But, it would be a more progressive tax system that would see the richest pay a lot more in taxes. And apparently, the richest people in US want to see their tax rates raised as well. No punishment for technical innovation: A tax on Robots, with Robots defined so vaguely, would have corporations constantly worried about investing in technical innovation. That would no longer be the case with this approach. Technical innovation in Robotics would likely result in lowering of prices of consumer goods, which means that the purchasing power of entry level wages would increase over time.

A tax on Robots, with Robots defined so vaguely, would have corporations constantly worried about investing in technical innovation. That would no longer be the case with this approach. Technical innovation in Robotics would likely result in lowering of prices of consumer goods, which means that the purchasing power of entry level wages would increase over time. A necessary first rung in the ladder: In time, an entry level worker can acquire the necessary skills to command a higher salary and successfully out-compete Robots. Or the worker may become an entrepreneur, competing against other corporations. In both cases, entry level employment opportunities are a necessary stepping stone to empower that worker.

In time, an entry level worker can acquire the necessary skills to command a higher salary and successfully out-compete Robots. Or the worker may become an entrepreneur, competing against other corporations. In both cases, entry level employment opportunities are a necessary stepping stone to empower that worker. Avoiding the anomie of purposelessness: The majority of human beings are human ‘doings’ (i.e.) they define themselves through their work. These tax credits would boost psychological health and promote a healthy sense of social belonging.

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