Economists and political pressure groups advocate for a "Robot Tax" to compensate workers displaced by technological advances and automation. This tax aims to retrain and upskill these workers, allowing them to adapt to the changing job market. But will such a tax help displaced workers or create a roadblock to technological advancement? The jury is still out.
The concept of a Robot Tax was first proposed by Microsoft founder Bill Gates and later supported by Bernie Sanders in his book "It's OK To Be Angry About Capitalism." This idea has now reached India, with the right-wing Swadeshi Jagran Manch urging Finance Minister Nirmala Sitharaman to consider a tax on labor-displacing technologies. The aim is not to discourage new technology but to cross-subsidize those losing jobs due to automation.
Across the globe, similar legislation has been introduced. Pat Burke, a New York state assembly member, recently proposed taxing corporations if their adoption of automation and AI results in worker layoffs.
Proponents argue that a Robot Tax would protect worker interests by generating revenue to support displaced workers. Studies, such as "Robots and Jobs" by Daron Acemoglu of MIT and Pascual Restrepo of Boston University, indicate that increased automation can lead to job and wage losses. The tax would provide economic support for displaced workers and prompt businesses to weigh the advantages of human labour against the efficiencies of automation.
However, taxing robots is not straightforward. The tax would fall on corporations, potentially discouraging modernization and technological adoption, especially as the world undergoes the Fourth Industrial Revolution. Countries like India are simultaneously grappling with the Third and Fourth Industrial Revolutions, making it crucial to find a balance.
Protecting and retraining workers is essential, particularly in emerging economies like India, where formal social protection programs and unemployment insurance are lacking. Historical lessons from past automation waves suggest that generous unemployment benefits and retraining programs can cushion the impact on workers.
As automation progresses, tax yields on wage incomes will decline due to job losses. India's reliance on personal income tax over corporate taxes for revenue collection necessitates finding new revenue sources to fund social protection and training programs.
Strengthening corporate income taxes and taxing super-profits in industries like petroleum could help. Additionally, taxing India's wealthiest individuals could generate significant revenue for social sector programs. A small surcharge on incomes beyond Rs 5 crore per annum could be highly beneficial.
While the debate on a Robot Tax continues, it is clear that measures to protect and retrain workers are crucial. Policymakers must explore innovative ways to generate revenue and support displaced workers, ensuring a smooth transition in the age of automation.