Should robots be taxed?

Guerreiro, Joao; Rebelo, Sergio; Teles, Pedro

Should robots be taxed?

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Citation

Guerreiro, J, Rebelo, S, Teles, P. Should robots be taxed?. 2018. handle: http://hdl.handle.net/10230/34457

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Abstract

We use a model of automation to show that with the current U.S. tax system, a fall in automation costs could lead to a massive rise in income inequality. This inequality can be reduced by raising marginal income tax rates and taxing robots. But this solution involves a substantial efficiency loss for the reduced level of inequality. A Mirrleesian optimal income tax can reduce inequality at a smaller efficiency cost, but is difficult to implement. An alternative approach is to amend the current tax system to include a lump-sum rebate. In our model, with the rebate in place, it is optimal to tax robots only when there is partial automation.