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Automation tax vs. Income tax for financing a Universal Basic Income

I am currently writing a chapter about a basic universal income and am considering different financing methods. My personal favourite would be the introduction of a land value tax, but I want to compare more taxes that could be used for financing a UBI.

Automation Tax

Businesses would be taxed based on the degree of their automation that replaces human workers. The more humans they replace with automation, the more taxes they would pay.

Pros:

  • Buffers the social costs of automation in a rather targeted way.
  • The common good of technology would be leveraged to finance the common good of a UBI. This is philosophically coherent.

Cons:

  • May discourage automation. It can be argued that fast automation will quickly replace bad jobs, which would be a good thing. On the other hand, automation will also inevitable eliminate many good jobs that people actually want to work in.
  • The degree of automation might be very hard to measure. Automation is also heavily used by individuals for personal use: Washing machines, dish washers, computers, and soon robots. So, the automation tax would be restricted to businesses who use automation for a profit motive. Anyway, it’s hard to define how automation relates to “equivalent” human work, because the amount of work a human can do also depends on the degree of automation applied by that human. The required estimation of automation might be a bureaucratic nightmare and quite arbitrary in many respect creating significant imbalances in the economy
  • Disincentivizing automation might also decrease economic growth
  • Introducing just another new tax makes the tax system more complicated.
  • Businesses who depend on a high degree of automation might consider outsourcing their activities to countries without automation tax.
  • It would tax the most efficient companies, so it would punish moving towards higher efficiency. Not a good idea.

Higher Income Tax

Pros:

  • It’s a tax that already exists, so simply increasing it is something that may not be politically popular, but it would be quite feasible.
  • Companies already pay taxes on their profits, so profits they gain from increased automation are already taxed. It may be better to adjust the taxes on company incomes rather than to tax automation specifically.

Cons:

  • Increases in income taxes are notoriously unpopular.
  • Income taxes create general economic disincentives which are bad for the economy.

Overall my impression is that higher income taxes are less problematic than automation taxes. What do you think about this issue?

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Note that an “automation tax” would not capture some important use cases:

  1. Companies start a brand new project/division but with far fewer people. They did not technically “replace” anyone, but the net result is fewer employed people

  2. A highly disruptive company enters a market and is able to displace existing employers with far fewer people. The existing employers shed jobs, but not necessarily because they were replaced by technology at those firms

Martin Ford suggested in Lights in the Tunnel something closer to a gross margin tax or VAT.

It may make sense to create a Citizens’ Bank or Fund that is independent of normal government spending pools. “Taxes” that just go to general government funding are viewed negatively. “Direct” redistribution that enables consumers to continue to participate in the economy even as their labor is less and less needed, without it seeming like a “big government program” might be more palatable.

True. That is something that needs to be considered carefully. Otherwise the government could use the tax money intended for the basic income for something else. The process needs to be fully transparent, so that no money can simply disappear into any wrong pockets.

Welcome to the Social Future Forum, geraldhuff, and thanks for posting! :slight_smile: