Wednesday, February 22, 2017

Robots and Taxes and the Future of the World

Izabella's back.

From FT Alphaville:

The misguided logic of a robot income tax
Bill Gates thinks robots should pay income tax to reduce the negative impact they could have on human workplaces and jobs.

As he told Quartz earlier this week:
“It is really bad if people overall have more fear about what innovation is going to do than they have enthusiasm,” he said. “That means they won’t shape it for the positive things it can do. And, you know, taxation is certainly a better way to handle it than just banning some elements of it.”
Except, does this assertion really make sense?

One of the reasons business owners look to make capital investments is to increase productivity and with that profitability. As machinery and equipment take on more of the work humans would otherwise be forced to do, output increases, and we all become wealthier. Or so the logic goes.
Either way, it’s profitability that business owners are after.

But operating costs matter a lot when figuring out if a capital investment is going to make economic sense.

If the cost of employing more capital is higher than the cost of employing more humans (with the former requiring fuel, maintenance and machinery supervision costs and the latter wages that are high enough to cover food, healthcare plus supervisor costs) then it doesn’t necessarily pay to invest in said capital. It might do, of course, but only if the associated output hike more than compensates for the additional operating cost.

Even then, more output is no guarantee of profitability. The value of machine-produced output must also be equal to the value of human-produced output and/or be so much greater in volume than human-produced output so as to compensate for any related discount. Only then can a return on investment be guaranteed.

If after all these factors are accounted for a capital investment does prove profitable it is and always has been customary for related profits to be taxed by governments. This is nothing new.
And herein lies the fallacy of Gates’ argument. A call for robot income tax is really just a call for more corporation tax and/or a wealth tax. 

But, as we all know, corporations don’t like paying corporation tax. To the contrary, they like to claim high corporate tax rates damage economies because they reduce industry competitiveness, undermine fiduciary duties to maximise profits and overlook corporations’ roles in creating jobs in the first place. Some also like to argue they discourage new investment and thus the chance for further value creation. Corporations, they note, should be entitled to retain or return profits to investors and/or reinvest them in even more capital (in a way which creates even more jobs).

It seems strange then for Gates to forget this argument just because the nature of the capital investment is now anthropomorphised. If investment in machinery is to be deemed productive and prosperity boosting, why should investment in robotic machinery or AI be any different? Either both are good for prosperity or none of them are? Either the investment increases productivity or it does not? And what constitutes a robot anyway?

Perhaps the distinction lies in the fact that old-school mechanical systems — which still require dexterous human supervisors (especially on the maintenance front) — don’t threaten salaried workers to the same degree robots do and thus don’t expose the inequity of the current mechanised capitalist system quite as glaringly....MUCH MORE 
The back and forth in the comments is interesting as well.
Plus the Amish do a buggy driveby.
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