Why the tech industry should lobby for a robot tax

Nobody likes taxation. It's a natural instinct for us to want to keep all of what we earn. But we all recognize that it's the bargain we make with society. We pay taxes in exchange for the structures that keep us safe — defense of the realm, a justice system, emergency services, a reliable road network, education for our children and those around us, a civilized minimum of healthcare, and so on.

Different countries set that bargain at different levels. An important element in determining the level at which it's set is the perception that it's fair — that the better off are not extracting an unreasonable share of the economy at the expense of those who, while less fortunate, also strive to make their contribution to society.

At certain junctures in history, the level of that bargain gets reset. When the contract is seen to be broken, popular uprisings occur, whether it's the citizens of Boston protesting the burden of taxation without representation, or the citizens of Paris overthrowing the French aristocracy for their callous disregard of the people's plight.

During the onset of the Industrial Revolution in the early 1800s, Luddites in England protested by smashing machines that were threatening their jobs. Nowadays we think of a Luddite as someone who opposes new technology, but in fact they simply wanted to reset the bargain:

The workers tried bargaining. They weren’t opposed to machinery, they said, if the profits from increased productivity were shared.

Why a robot tax?

Many observers see parallels today, when the rapid adoption of new technology is driving up returns on capital while depressing the share of the economy paid out to workers. This imbalance emerges most starkly in the huge wealth amassed by the newest generation of tech industry billionaires. The capacity to profit from applying technology — merely by having the good fortune to be in the right place and the right time with a modicum of innate talent — is growing completely out of proportion to the wages that ordinary folk can earn by their own efforts.

The advent of artificial intelligence is only going to increase this inherent imbalance. The potential to profit from capital investment in technology is becoming so great that it requires a reset of the share of profit taken by society to redistribute to those less fortunate.

That is why it is time to start talking about a robot tax. Indeed, the conversation has already started. Earlier this year, Microsoft founder Bill Gates mooted what I felt was a surprisingly simplistic notion of a robot tax levied when a machine replaced an equivalent human job:

Certainly there will be taxes that relate to automation. 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.

Personally, this seems a rather impractical and counterproductive tax on automation. I suspect that it makes more sense to impose a small, generic levy on company profits that reflects the greater leverage that capital can achieve with the augmentation of modern technology. In some ways, this is a variation on French economist Thomas Piketty's approach, as set out in his influential tome, Capital in the Twenty-First Century, of a global wealth tax to compensate for and redistribute the accelerating return on capital.

What to spend it on

Then there's the question of how the proceeds of this tax should be spent. Many have argued that it should fund some form of Universal Basic Income, or else a negative income tax which would supplement the income of the low-paid to bring it up to a predetermined level. But there are problems with such suggestions. In particular, paying a viable UBI to everyone is hugely expensive, and benefits the better off as well as the low-paid.

Therefore I would personally argue for redistributing the proceeds of a robot tax in more indirect ways. In fact I would not officially call it a robot tax, although I recognize that is likely to be its popular name. I would rather call it 'the commonwealth levy' so that it is seen as a levy on the profits of automation, whose proceeds are invested in society for the greater good.

Properly directed, the proceeds of this levy should be used to help neutralize the sense of not sharing in rising prosperity that's been expressed in recent elections. As I wrote in an earlier piece on technology, diversity, globalization and the left-behind:

The political message of 2016 is that those left-behind communities must not be neglected. They see a connected, technology-driven world leaving them behind, as globalization and automation destroys the industries and jobs that once provided secure employment. The trickle-down crumbs of economic benefit from continuing technology innovation and global economic expansion provide scant compensation.

Thus the proceeds of the commonwealth levy would be invested in neglected regions, in extra education and training for those whose skills have been left obsolete by technology trends or who are otherwise disadvantaged. Businesses who are falling behind in technology investment would be able to claim short-term rebates against the levy to help offset the cost of catching up with their peers.

Why tech must lead the debate

It is up to governments and their populations to decide the details of how the levy should be administered and how its proceeds should be distributed. It would be a failure if it ended up being squandered on the kind of pork-barrel projects that have made so many people disillusioned with government programs in the past. Perhaps instead the technology industry could contribute some kind of crowdsourcing model to help inject more democracy into the distribution of funds — a possible role for the Win the Future initiative just launched by Mark Pincus and Reid Hoffman.

For it is in the interests of the technology industry to help shape whatever form a robot tax will take, and to ensure its success. If the industry does not make this happen, then sooner or later there will be a popular backlash against the social disruption and dislocation caused by the onset of the robot revolution and the huge change in job prospects brought about by artificial intelligence.

Driven on by an angry public, who knows what direction the politicians will choose to take? The results could be far less constructive and far more detrimental to the success, and therefore long-term prosperity, of the tech industry, and of society as a whole.