Former Microsoft CEO Bill Gates is much smarter—and richer!—than I will ever be, but even smart, rich men can have bad ideas.
During a February interview with the digital news outlet Quartz, Gates suggested that robots should be taxed as a way to compensate factory workers displaced by automation. Since factory workers pay Social Security and income taxes, he reasoned, if those workers are replaced by robots, then the robots should be similarly taxed to restore the lost government revenue. Gates worried that the rate at which factories are implementing robotics and automation is outpacing the economy’s ability to reallocate displaced factory workers. A robot tax would tamp the brakes on automation and generate revenue for retraining, education and social services.
To be fair, Gates is not the only one to suggest a robot tax. Earlier this year, the European Parliament rejected just such a proposal. Closer to home, in Wisconsin, some state legislators are pushing to repeal a tax credit for manufacturers because, as one lawmaker put it, some companies are merely using the tax break to create “factories full of robots” rather than people.
In a statement, the International Federation of Robotics predicted that the EU’s robot tax “would have had a very negative impact on competitiveness and employment.” We could not agree more.
We think taxing robots and factory automation is a bad idea. First, robots have created or preserved manufacturing jobs in the United States by increasing productivity. For example, the U.S. automotive industry installed more than 60,000 robots between 2010 and 2015. During that same period, the number of employees in the industry increased by 230,000. Similar results can be seen in the most advanced economies in Europe and Asia.
According to a recent study by the Organisation for Economic Co-operation and Development, companies that effectively employ technology are up to 10 times more productive than those that do not. Gates, of all people, should know this. Did not the PC revolution transform the business world? (Perhaps we should tax software billionaires to compensate people for having to check their Outlook accounts during off hours!)
Research also shows that automation actually results in a positive tax balance. When repetitive or dangerous tasks are taken over by robots, it leads to the creation of new, safer, higher-skilled and higher-income jobs.
At any rate, we need not fear an era of “lights-out” robotic factories and aimless people deprived of meaningful work. According to the McKinsey Global Institute, more than 90 percent of future jobs will not be fully automatable anyway. Instead, robots and people will increasingly work together.
We must make it easier, not harder, for manufacturers to invest in automation. A robot tax would make investments in productivity-enhancing technology more expensive. That’s not a good idea.