Robots and taxes: how to fund the universal basic income?

One of the most daunting challenges of introducing a Universal Basic Income is figuring out how to fund it. If millions of people are going to be thrown out of work by automation and AI, government budgets will already be hit by the double-whammy of a precipitous decline in tax revenues caused by a dramatic rise in unemployment combined with a huge increase in expenditures to cover the resulting additional welfare costs. Where would the money come from to fund such a significant new initiative at the same time?

In a recent interview with Quartz Bill Gates grabbed the headlines by floating the idea of a robot tax to ease the dislocation. The revenues generated by this, he argued, should be used to create jobs in elderly care and education “where human empathy and understanding are still very, very unique.”

However, beyond suggesting that “one concrete thing governments could do is tax the installation of a robot in a factory,” Gates didn’t provide any specific information on how such a scheme would work. He was also equally vague with his other idea that a tax could be levied on the “labor-saving efficiency” enabled by such machines. Presumably, it would be the job of governments to work out the details.

Despite the vagueness of his proposals, Gates did provide pointers to the radical changes that governments are going to need to make to their tax codes in order to make up for shortfalls caused by changes in employment patterns. As part of this process, they will need to take a close look at the feasibility of taxing not just the installation of robots but also their operation and the transactions they generate. Thanks to the proliferation of sensors, big data, and cloud analytics, the automated tracking of such items will certainly be feasible in a technological sense. But the question remains whether governments will have the political will to push through such dramatic changes in the face of what would undoubtedly be fierce opposition from business.

If governments don’t find the courage to address these issues, it won’t just be the idea of a Universal Basic Income that will be threatened. Other programs, too, will suffer as a result of heavy budget pressures. The time to start devising creative solutions to this problem is now.

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