Microsoft creator Bill Gates says that robots that take human jobs should pay income tax. Zillionaire businessman he may be, but does he understand basic economics? It seems not.
First, robots are already taxed – to the hilt. They are a form of capital, and capital has long been an easy mark for high-spending politicians. But capital does not just grow on trees, you have to create it. That means cutting your consumption and putting something aside to make all the tools that you hope will make your life easier and more productive in the future.
Of course, the only certainties in life are death and taxes (and unfortunately they come in the wrong order), so the labour-saving robots we buy for our homes and kitchens come out of taxed income. And if we are silly enough to actually invest our savings until we have enough for that new computer or new car, we pay tax on the interest (and on inflation as well).
Regarding the businesses that make robots and computers other tools, the investors who finance them already pay income tax, or company taxes on the return that their investment makes.
Second, remember that a robot is just a tool. They may be very fancy tools, but to economists they are no different from any other kind of tool going back to pre-history. They are just another form of capital that boosts your productivity.
The tools that have ‘taken’ most human jobs are not robots, but the most basic tools developed by our early ancestors. Think how many workers you could save by digging the peat to fuel your roundhouse with a wooden spade, rather than by hand. It is a hundred times easier. If you then transport the peat back home using a wheelbarrow – another tool – you save even more time and back pain. And so it goes: the spinning jenny, the cotton gin, the water frame, steam, internal combustion, electricity, the internet, industrial robots… they all allow us to produce and enjoy much, much more. Bill Gates’s logic is that we should tax all tools, from spades to spanners. Nuts.
And do these tools actually ‘cost’ jobs? No, they have allowed humanity to prosper and increase, with far more of us now engaged in far more productive and useful things with far less effort, time and cost.
Most of us would think that a rather good thing. When you tax things, you tend to get less of them. So why tax tools? Why tax progress?
Third, do not get taken in by the politicians’ talk about how great jobs are. Leisure time is Christmas: jobs are the January credit-card bill. Jobs are the sacrifice you have to make to get what you want.
Entirely naturally, we want that sacrifice to be as small as possible. We want to work less, work in more enjoyable forms of labour, and have more time for ourselves to spend with our families, our leisure, our interests, our philanthropic activities and all the rest. You don’t help human workers by making the tools they need to achieve these things more expensive. Indeed, if robots liberate us to do all these desirable things – as they do – they should get a reward, not a tax bill.
Fourth, if you really do want to help humankind, is yet another tax the answer? We’re taxed on what we earn, what we spend, the spirits we put into our cars and our stomachs, the flights we take, the investments we make, the people we employ, the gambling we enjoy. Taxing our tools too is too much.
A much better idea than putting income tax on robots would be to remove income tax on humans. That would spur human progress faster than even the visionary Mr Gates could ever imagine.