Bill Gates: Luddite? Marxist??

Bill Gates wants to tax robots that displace human workers.  No, really.  You can read about it here.

So, does this mean Gates is a kinder, gentler form of Luddite?  Ned Ludd and his followers famously destroyed weaving machines that he blamed for unfair treatment of workers.  Gates doesn't want to smash the robots, but standard economic theory suggests that if you taxed them,  fewer of them would be used.

Or is Gates coming late to the Marxian labour theory of value?  After all, the word "robot" derives from the Russian word for work.  If all the value in the economy is ultimately created by workers, then the only source of tax revenue must ultimately be those workers, whether they are human or machine.

Let's unpick this a little further, starting with this proposition: all taxes are ultimately paid by individuals. That's obvious in the case of personal income and consumption taxes, but it's also true of corporate profits taxes.  Those are, in the final analysis, paid by the owners of the company, whether they are proprietors or shareholders, because the taxes reduce the amount that can be paid out as dividends.

What we have seen in developed countries in recent decades is a successful campaign by the owners of corporations to reduce the proportion of the overall tax burden that falls on them.  The "race to the bottom" in terms of corporate tax rates has significantly altered the distribution of the tax burden.  While it has achieved some notable successes -- see for example Singapore, or Ireland before the financial crisis -- it has unarguably contributed to mounting economic inequality.

Nor is there any reason to think that the balance is about to be redressed.  Donald Trump, with the full support of the GOP majority in Congress, is set to reduce the US corporate tax rate to 15 percent.  This will inevitably put pressure on other countries (not least Canada) to take similar steps.

So: personal tax rates are much higher than corporate tax rates, and that gap may widen still further. But as robots continue to supplant human labour, the distribution of income will continue to shift from labour to capital.  This means that tax revenues will inexorably fall, which will in turn put pressure on governments to cut social programs in order to forestall massive budget deficits.  Evisceration of social programs may well be the ultimate goal anyway -- see the aforementioned GOP, or the Tory Party in the UK.

What this all comes down for is that in calling for a tax on the earnings of robots, Bill Gates is really calling for higher taxes on corporations, in order to offset a declining tax take from labour income. But if we recall our proposition that all taxes are ultimately paid by individuals,  this means that Gates is actually calling for higher taxes on the wealthy: the shareholders and proprietors.  He's not wrong, but you wouldn't like his chances of convincing the rest of the 1 percent, let alone Donald Trump.