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Robots are coming, but should we tax them?

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This article was originally posted on the Alwin Club, and is authored by Jay NibbeGlobal Vice Chair, Tax , EY.

Microsoft Co-founder Bill Gates recently floated the idea of taxing them and using the funds to retrain people who have lost their jobs to automation. Robots themselves, of course, can’t pay tax (at least not yet …) but the companies that prosper from them certainly could.

“Right now, the human worker who does, say, US$50,000 worth of work in a factory, that income is taxed and you get income tax, social security tax, all those things,” he said in an interview this year with Quartz. “If a robot comes in to do the same thing, you’d think that we’d tax the robot at a similar level.”

He isn’t alone in this view. In February 2017, a European Parliament proposal to tax robots was narrowly defeated.

Replacing lost income

Tesla and SpaceX founder Elon Musk and others go beyond the idea of a robot tax, arguing that society will need to give people a basic universal income to replace income lost due to technology.

This is not a blue-sky idea. Some jurisdictions are already running trials to see how it might work, including Finland, three towns in Ontario, Canada and several cities in the Netherlands. The startup incubator Y Combinator is running a privately funded pilot program in Oakland, California.

Most proponents seem to generally agree that the basic universal income would be a bare minimum needed to get by. But there is no agreement on what would fund it. A robot tax? A consumption tax? A wealth tax? Or what the tax levels would need to be, since funding would presumably come in part from transfers from existing programs.

At the February 2017 World Government Summit in Dubai, Elon spoke out about the future need for some kind of universal basic income. But he also pointed out, “The much harder challenge is, how are people going to have meaning? A lot of people derive their meaning from their employment. So if there’s no need for your labor, what’s your meaning?”

[WATCH] Our animation on Robotic Process Automation

Seeking meaning

Which brings us back to the misery of not working. What would motivate us to get going in the morning to seek meaning if not for work?

Martin Ford, author of the 2015 book Rise of the Robots: Technology and the Threat of a Jobless Future, told CNBC last year that along with taxing the owners of the technology and robots, other sources to fund basic universal income programs could come from taxes on capital wealth, consumption or carbon. The tax revenue, he has said in the past, would give consumers the buying power that would drive the economy.

And what would replace the satisfaction we now get from work?

Ford has also said that self-worth and motivation for self-improvement would come in part from activities incentivized by extra basic income, such as education, volunteering, innovation and work still requiring human attributes.

“At some point we will get to a point where the cost of not doing this is greater than the cost of doing it,” Martin told CNBC. “And at that point maybe it becomes easier.”

Just 25 years ago, few people had heard of the internet, but in the interim it has transformed our lives. While nobody yet knows what the future will bring, we’d better start planning. The robots are ready to report for work.

Graham Reid

Head of Markets
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