Contradictory Taxes
In April, while many Americans begrudgingly paid their taxes, others were taken to task for not paying enough or any taxes at all. Reports of Amazon’s $0 corporate tax bill generated a number of conversations about why one of the largest corporations in the world, headed by one of the richest men in the world, paid fewer taxes than the average American. Critics, including Senators Elizabeth Warren and Bernie Sanders, pointed out that companies unfairly benefit from tax breaks not available to most Americans. At the same time, another debate was occurring: this one about taxes on robots.
While raising taxes on the wealthy has been an ongoing debate for decades, the idea of a robot tax is fairly new. In theory, a robot tax means companies who automate work would have to pay taxes, which in turn would fund programs, like job training and some form of supplemental income, for workers who might be displaced by this automation. Rather than stemming from a desire to combat income inequality or ensure fairness, the robot tax addresses fears of massive job loss.
Right now, taxing the rich and robot taxes exist as separate conversations. Taxing the rich is viewed as a response to income inequality, while a robot tax is viewed as a response to a future job problem. I argue that these two conversations should be more closely connected because current tax credits favor technology investments. Corporations, including Amazon, can significantly reduce their tax burden by taking advantage of tax credits for investing in equipment and other business activities that favor automation.
Some academics and researchers have noted this contradiction. Professors Ryan Abbott and Bret Bogenschneider of the University of Surrey School of Law analyzed the U.S. tax code and concluded that it incentivizes automation through tax breaks for investing in equipment and research and development.
In 2017 when Microsoft co-founder Bill Gates first suggested a robot tax, it received a tepid response, although a few political leaders did latch onto it, including those of the UK, San Francisco, and South Korea. The proposal lacked specificity about how such a tax would be accomplished. For example, what qualifies as a robot? How much should the tax be? What constitutes job displacement? Two years later, only South Korea has moved forward with a tax proposal which involves reforming the country’s tax code to reduce incentives to automate.
Despite fears over widespread job loss and calls to develop viable forms of a robot tax, President Trump has accelerated tax breaks for capital spending through the Jobs and Tax Cuts Act of 2017. Generally, tax credits designed to encourage companies to invest in their infrastructure are uncontroversial and receive bipartisan support. The economic argument is that tax credits create incentives for companies to reinvest, which in turn boosts productivity and growth, as well as creates jobs.
In 2017, The Intercept investigated corporate reactions to the proposed act by observing how executives talked about the tax proposal to investors. According to the article, some executives boasted that accelerated tax breaks for equipment would spur greater automation. According to The Intercept, “Firms that supply automated machines and other assembly line robots, including Rockwell Automation Inc., and Emerson Electric Co., have in recent weeks celebrated the tax reform provision, expecting increased revenue as clients order more products.” Manufacturers of automated systems were anticipating a spike in orders from companies looking to take advantage of the accelerated tax write-offs.
The Act contains a specific provision which allows companies to speed up depreciation of capital spending, including investments in machinery and upgrades to plant facilities in the first year, rather than amortizing over time. These accelerated schedules allow companies to report these investments as losses on their annual taxes, reducing their net earnings. In addition to these write-offs, tech companies like Amazon, Google, and Microsoft benefit considerably from tax breaks for research and development.
These credits can be quite significant for technology companies. In 2017, Amazon spent $22.6 billion in research and development of new products, including Alexa and Amazon Go, a grocery store concept powered by monitors and sensors designed to minimize cashiers. Amazon is also known for experimenting with different technologies, like wristbands that control worker movement and belts that make humans visible to robots, both of which likely fall within this category. According to Fortune, Amazon continuously invests in its business, allowing it to reduce its effective federal income tax rate to 10.8% for the past years. Quoting Amazon’s own SEC filings, Fortune found that such expenses are likely part of $419 million in income tax credits in 2018, which it says it is “utiliz[ing] to reduce our U.S. taxable income” and which allows the “full expensing of qualified property, primarily equipment, through 2022.”
The Institute on Taxation and Economic Policy, which advocates for eliminating loopholes and breaks for corporations, found that these credits are considerable, particularly for technology companies like Amazon and Netflix. Even though incentives to entice corporate investments have a long history, the institute questions whether tax breaks have stimulated economic activity. For instance, the same Intercept article found that executives disagreed over whether automation would replace human workers or make workers’ lives easier. Some executives interviewed felt that the autonomous systems being integrated into shop floors would be more akin to “co-bots” that work alongside humans to make their jobs easier by reducing strain and repetitive tasks. Others felt that it would at the very least disincentivize new hires and instead encourage investment in new equipment.
Researchers and academics have questioned what type of tasks AI and automation technologies are actually solving for. Daron Acemoglu from the Massachusetts Institute of Technology and Pascual Restrepo from Boston University recently published a paper that found most technology is being designed to perform tasks that humans can and are already doing, rather than solving problems that humans have not been able to do or do well. The paper calls into question whether robots will augment or replace human workers.
In the same month that Amazon’s $0 corporate tax was disclosed, an Amazon facility opened in Salt Lake City where robots outnumbered humans. In 2018, Bloomberg reported that Amazon was contemplating a massive rollout of Amazon Go stores across major metropolitan areas, stores that compete with existing markets, which also feel pressure to become cashier-less.
Acemoglu makes a compelling argument for revisiting corporate tax credits as we discuss taxing robots and raising taxes for the highest income earners. Taxing the wealthiest at a higher rate, or imposing a robot tax in the far-off future, doesn’t directly address the inherent incentives to automate jobs that further hasten this worker-less future. Let’s not accelerate automation now, so we don’t have to tax it later.
Aiha Nguyen leads the Social Instabilities in Labor Futures Initiative at Data & Society.
Contradictory Taxes
Research & References of Contradictory Taxes|A&C Accounting And Tax Services
Source
0 Comments