Should robots pay income tax?

This is a follow up post to “Robots of Nappa” Post.  This question is raised by none other than Bill Gates.  No he did not respond to my blog, I’m pretty sure Bill doesn’t know I’m alive.  No, I read his comments in a newsfeed called Quartz, whichI didn’t know existed until I read the Bill Gates story.  

Gates position is this, if a robot takes your job, the owner of the robot should  pay the income tax on the value of the labor being done.  At first I thought, that’s stupid.  Then I thought, that’s brilliant!  Then I thought, holy quagmire batman does this open up a kettle of fish!

As you know, I like robots.  I have often been criticized.  Oh, yes I have.  One of the many things I am criticized for is not feeling the pain of workers who are replaced by robots.  All those hard working miners who have lost their  “good paying” jobs working in mines. Or what about all those factory workers who lost their jobs in factories?  

Well, I’ve thought that liberating humans from doing meaningless, dangerous work was a good thing.  I didn’t know using machines to do that work that could kill or meme people was taking away their dignity, sense of worth and most of all an important uninterrupted money stream for governments.

Let’s use a data about a company I know something about, FOXCONN, to make a point.    Foxconn is the  world’s largest contract manufacturer. It employs over 1 million workers.  Starting in 2011 they installed 10,000 robots.  They call them FOXBOTS.  Today they are installing 30,000 a year.  Each robot costs about $20,000.  They perform routine jobs painting, welding and assembling.  In the future they will have a million robots, which means they will NOT need to hire a million humans.

Apply Moore’s law to robots 40% performance increase per year.  Your $20,000 robot today in quantities of 500 will cost $5,000 and be more efficient in just a few years in quantities of 10,000.   Even the lowest paid workers in the least developed countries will be uncompetitive. This data is from a 2014 Harvard Business School article by William  H. Davidow and Michael S. Malone.

Economist Brian Arthur predicts that intelligent machines by 2025 will replace 100 million workers and if you want to have something to panic over, current civilian workforce is 146 million.  Hell yes, tax those robots and make sure they pay my social security!

Now to be sure a sizeable number of the jobs lost will be made up by new ones, but not all of them.  It’s estimated that about 40 million will not be replaced.  That’s 40 million humans left behind.  Houston, we have a problem.  For the first time that I can remember human value is now being measured by the cost equivalent in machine intelligence.

Many of the solutions I have read about are big top down government solutions, more education, more infrastructure, greater government command and control.  It takes humans 20 years to produce a worker.  It takes less than 2 to 5 years to produce a faster, stronger, more intelligent robot, and  less than a day to build it if you have the correct supply chain.  We are going to need a better more individualized, cultural approach to solving this problem.  Big government will not give us the solution.

Now here is a different response from Shawn Hermans, Data Scientist at Bellevue University.  Mr Hermans correctly asserts that economics is not a zero sum game. As as previously pointed out jobs lost are replaced by usually better jobs that pay better.  That since the beginning of time technology has replaced labor done by humans.  This is a good thing and if it hadn’t happened we’d be spending all our time looking for food and not wasting time on Google.

He thinks the idea of robots displacing workers is shrinking the tax base is “flawed”.  He points out that the taxes paid by the lowest 50% of workers is only 2.25% and these are the people who are most at risk of being replaced by robots.  So, the cold reality of things is if these people are replaced by robots the tax impact would be minimal.  I see his point but what do we do with 40 million non-productive humans?

Well, it turns out our buddies in Europe have been wesseling with this question even longer than Bill Gates.  Because their governments have a lot more to lose than ours.  We are only concerned about social security and disability.  In Europe they have maternity leave, health care, education, soccer teams, the Italian banking system, Greek loans to Germany, way more to lose if they can’t tax robots.

Their answer, call them “electronic persons” give them a union card and send them off to work.  Sort of Centennial Man meets Norma Rea.  Simply mandate that robots are people. Preferably well compensated, highly taxed Frenchmen and presto competitive edge against humans removed assembly lines are back up and running, tax receipts continue all back to normal anyone for some wine and lunch?  R2D2 will you be joining us?

The end result of this would be to impoverish the entire continent.   This is nonsense, which means in Europe there’s a pretty good chance it will happen.

I once read my favorite dingbat economist Paul Krugman said “productivity isn’t everything”. Ah, well, Paul, in the long run productivity is pretty much everything. Since time began machines make every hour of human labor more productive which has improved the human condition.  I can’t see us stopping now.  Then I can’t understand how a proposal to tax people who employ robots to make us safer and economically better off is a good thing.

For me the scariest word I saw in the Gates article was EMPATHY.  Bill thinks government should show empathy to displaced workers and this tax on robots is the way to do that.  That scares me.  I don’t know about you but all my dealings with the government came with a guy with a badge and a gun and the not too subtle implication that they will use both if I did not comply to what they wanted.  I have never received empathy from the government nor do I expect it.  Government is about POWER, not empathy.

Free exchange is the form of social interaction that most encourages empathy.  If you want something, and somebody else has it, what’s the best way to get it?  Well, you can use force and steal it, you can beg, borrow, or you can trade for it, trust me for 80,000 years trading has been the most successful, least bloody way of achieving empathy.  The Government will use force and steal it. Legally of course!

We’ve been here before, we’ll solve the problem.  Taxes and big Government is not the one that will work.  I’m open to suggestions.


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