Taxing Robots Will Hurt California Innovation and Opportunity

A California governor who went on to greater things was known to say that if government sees something move, it will tax it. Ronald Reagan’s words, spoken more than 30 years ago, are being played out today by a lawmaker who wants to enact a robot tax.

Jane Kim, a Democratic San Francisco supervisor and one-time community organizer, has “launched a campaign called the Jobs of the Future Fund to study a statewide ‘payroll’ tax on job-stealing machines,” Wired reported in late August.

“Proceeds from the tax would bankroll things like job retraining, free community college, or perhaps a universal basic income — countermeasures Kim thinks might make a robotic future more bearable for humans.”

Maybe hers is a sincere attempt to help. But it’s just as likely yet another instance of government envy: When some in state and local government see an industry, company or innovation growing fast, their first instinct is often to tax it. Think of the covetous eyes they cast on internet sales when they began to boom.

Either way, the effort is misguided. Taxing automation will chill a roaring industry. It’s a punishment for innovating. The incentive to develop robotics is driven by companies’ abilities to make money. If profits are curtailed, so is the incentive to innovate. The harm extends beyond just the targeted industry or sector, because the economic forces that would grow the overall economy, lifting all boats, are restrained.

As Kim’s “Jobs for the Future” campaign “studies” the “automation revolution,” we hope she runs across the data that show that fears of job losses to automation are exaggerated.

“All the evidence shows that workers are not losing jobs due to automation, or at least at a much slower pace than in prior decades,” says the Center for Economic and Policy Research.

Automation is key to increased productivity, which is needed in California and across the country if we’re to make up for the slow growth of 2009 through 2016. It is also, according to Bloomberg, “helping small businesses survive.”

Economies must move forward, or they will wither and die. Imagine where we’d be if the automobile industry had been held back by government to help buggy and wagon makers stay in business. Or if the government increased taxes on airlines for the benefit of the railroads. Innovators that revolutionize existing structures pump “the perennial gale of creative destruction” that Austrian economist Joseph Schumpeter said is necessary to a growing economy.

Imagine, as well, if the robotics that help build our cars had been of limited use due to taxation. Robotics put men out of work on the assembly lines, but the economic churn also frees them to move into the better jobs that are produced by a more advanced economy. Robotics have also made cars more affordable for a wider group of buyers.

Rather than fear losing jobs to automation, we should celebrate the benefits of robotics. As Ronald Bailey, writing for the Reason Foundation, has noted, “Over the past two centuries … automation has brought us lots more jobs — and higher living standards too.”

Economists Georg Graetz of Uppsala University and Guy Michaels of the London School of Economics produced a 2015 study which found that between 1993 and 2007, Michaels said, there was “a negative effect of robots on low-skilled workers’ employment,” yet there was “no significant effect on overall employment.” In other words, the low-skilled workers at best moved into better jobs and at worst stayed in similar jobs.

“Their study,” writes Bailey, “also found that the increases in the number of robots boosted annual economic growth by 0.37 percent.”

Critics and worriers, though, will say it’s different this time — the robots are finally going to rob us of our jobs. Are they right?

“Of course this time is different; every time is different. On numerous occasions in the last 200 years scholars and activists have raised the alarm that we are running out of work and making ourselves obsolete,” Massachusetts Institute of Technology economist David Autor said last year at a TED talk. “These predictions strike me as arrogant.”

He pointed out that there’s simply no way to know “what people will do for work in the future.”

Continued progress in automation is vital to California’s economic future. Fast Company has ranked the world’s top 10 most innovative robotics companies, and five are based here. But automation’s importance goes beyond designing, development and manufacturing. It will radically transform agriculture, transportation, shipping, medicine, manufacturing and other industries important to California.

Kim herself has said “the center of the technological revolution” is in California. So why punish it? Just leave it alone, let it grow organically and reap the economic benefits.

Read more . . .

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

Scroll to Top