Sunday, May 12, 2019

Humans, Robots, Industrialization, and Tax Policy

In general, I’m probably about as excited to listen or read about the area of tax law as most people are about the area of clearing and settlement (not that I understand this!).  However, at a January 2019 symposium organized by the University of Pennsylvania Journal of Business Law, in collaboration with the Center for the Study of Business Ethics, Regulation, & Crime at the University of Maryland, on Harmonizing Business Law, Kathryn Kisska-Schulze & Karie Davis-Nozemack completely captured my attention in a presentation that focused on “the intersection of U.S. industrialization with employment and innovation tax policies.”  I’d never given any thought to the potential implications of the increasing automation of the workplace for existing social safety nets.  Yet it immediately struck me as a critical, timely issue. 

So, I was delighted this weekend to have a chance to read their recently posted article, Humans vs. Robots: Rethinking Policy for a More Sustainable Future (forthcoming, Maryland Law Review).  I learned a lot.  For example, I never knew that in addition to writing about the “invisible hand” and moral sentiments, that Adam Smith also wrote about tax!  As this article is a really interesting read about a topic of great significance, I wanted to share its abstract and to encourage readers' review:

Robotic and software innovation threatens to displace one third of the global workforce by 2030. Widespread worker displacement would decimate U.S. social safety net funding. To address these issues, Bill Gates and others have proposed a robot tax. A robot tax, while elegant on its face, masks the underlying tension between innovation and employment tax policies. Only by examining the foundational principles of these two policies is it evident that their dissonance can only be harmonized by requiring these policies to remain faithful to their original objectives.

Innovation policy has strayed from its twin economic and social welfare objectives. As economic progress has more recently eclipsed the importance of social goals, innovation policy no longer works in concert with employment tax policy. Indeed, insofar as innovation policy fosters workforce automation substitution to the detriment of the U.S. social safety net, it undermines employment tax policy. Employment tax policy never contemplated the extent and sudden arrival of automation substitution in the workforce. In its current form, the employment tax is insufficiently robust to adjust to automation substitution. Consequently, a new approach to tax policy analysis is needed.

The intersection of innovation and tax is an undertheorized area. This article highlights the tension that automation creates amongst employment tax and innovation policies by identifying the fundamental objectives that motivate each policy. This paper is the first to harmonize the dissonance between innovation and employment tax policy, the first to use the lens of sustainability to address the dissonance, and the first to introduce sustainable taxation as a superior approach for crafting tax policy and for harmonizing employment tax and innovation policies, in particular.

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