The backlash against Bill Gates' call for a robot tax

Bill Gates, who has done more to propel the world into the high-tech age than almost anyone, recently called for taxing robots. That has provoked enough negative feedback to fry a motherboard, with critics decrying him for wishing to hold back progress.

Numerous detractors, including Harvard economist Lawrence Summers, the former U.S. treasury secretary, have poked holes in the idea, arguing it would be counterproductive. Summers asked why Gates wants to “reduce the size of the pie” and dubbed his plan “protectionism against progress.”

Gates, co-founder of software giant Microsoft (MSFT) and the world’s richest person, told Quartz in February that the U.S. should slap a tax on robots, which take the rap for destroying humans’ jobs. In Gates’ words: “Right now, the human worker who does, say, $50,000 worth of work in a factory, that income is taxed and you get income tax, Social Security tax, all those things. If a robot comes in to do the same thing, you’d think that we’d tax the robot at a similar level.”

The revenue gleaned from a robot tax should be channeled to retraining displaced workers, he said. In a way, his speaking out on this topic isn’t surprising. Gates, who’s worth $75 billion by Forbes magazine’s estimate, has an idealistic side. The Bill & Melinda Gates Foundation, which he set up with his wife, is tackling poverty, health problems and poor education worldwide. A request for comment from Gates about the criticism drew no response. 

In the Quartz interview, he worried that the increasing use of automation will only accelerate and make the job-loss problem worse. A tax would “slow down the speed of that adoption somewhat,” he said, referring to greater use of robots. And he opined that government would be better at retraining affected workers. “Well, business can’t,” he said.

American job losses, particularly in manufacturing, are a hot-button topic now. President Donald Trump has focused on employment exoduses to low-cost countries like Mexico, and he vows to reverse that trend. But automation is easily as big a culprit here. Vehicle and electronics manufacturing are the largest users of robots at the moment, according to International Federation of Robotics, which projects robot sales to climb 13 percent a year through 2019. 

The fear is that robots -- or technology, in general -- will spread into other corners of the working world, knocking out jobs for the likes of warehouse workers, truck drivers and retail clerks. Indeed, nonhuman labor has inched into many of these areas already. 

Advocates for automation contend that, while some jobs are destroyed, others that pay better are created. The question is whether the number of new jobs will be sufficient to offset the ones rendered obsolete. Another concern: Can low-skilled, poorly educated employees be retrained for the new, more data-driven work arena?

Although Gates didn’t spell out how much of a levy should be placed on robots or how it would be administered, the idea drew a lot of complaints that he was being naive. 

While Microsoft is a leader in artificial intelligence research, Gates’ critics label his tax notion as opposing progress, a neo-Luddite prescription for a 21st century dilemma. (The Luddites were British workers in cotton and wool mills who destroyed machinery they thought threatened their jobs.)

“That’s how it comes across,” as a Luddite solution, said economist Dean Baker, co-director at the Center for Economic and Policy Research. This “is a tax on productivity growth.” The 1947-1973 period and the late 1990s were times of “mostly low unemployment and rapid wage growth” amid pell-mell productivity expansion, he noted. 

To be sure, automation is nothing new and in numerous instances has benefited workers: Carmaking plants installed chassis-painting machines in the 1960s, sparing factory hands from breathing toxic fumes.

“Why pick on robots?” former Treasury Secretary Summers asked in a Washington Post opinion piece, which called Gates “profoundly misguided.” The economist argued that progress, however messy and disruptive sometimes, ultimately benefits society overall.

Summers cited robotic-aided surgery, which allows doctors to perform more precise operations, and online reservation systems that are faster and more convenient than travel agents. He added: “Does Gates think anyone, let alone Congress, the Trump administration or a commission composed of his fellow technocrats, can distinguish labor-saving activities from labor-enhancing ones?” 

Mike Shedlock, a financial adviser with Sitka Pacific Capital Management in Edmonds, Washington, wrote on his blog that robot owners, who likely would pay the tax, would simply pass it along by jacking up prices. And having Washington use the tax proceeds to train displaced workers is folly, he wrote, adding: “How will the government, Bill Gates or anyone else know the correct retraining field?”

Gates isn’t alone in calling for a robot tax -- and the pushback against the idea isn’t confined to the U.S. The European Union’s parliament in February rejected a measure to impose a tax on robots, using much the same reasoning as Gates’ critics.

Of course, Gates also has his defenders, of a sort, albeit ones who would refine his proposal, which is short on specifics. After all, it’s unclear how much of a tax it would take to thwart the march of the robots. Michael Lind, a fellow at the New America think tank, said robot producers should be taxed, but instead of channeling the money to retraining, the better path would be to make tech-displaced workers eligible for existing government benefits earlier. 

“You have a 54-year-old truck driver displaced by a robot,” he said. “Why not lower the age of Medicare eligibility for him?” That’s 65 at present and 62 for reduced benefits. “Why not lengthen the term for unemployment insurance?” Most states now offer 26 weeks of payments.

Gates himself said robot job killers risked provoking a Luddite backlash among their victims. But as the humans in the “Terminator” movies found out, stopping the rise of the machines is very difficult. As Lind noted, increased automation is a very strong trend that Gates has done much to feed.

The computer industry used to employ hordes of punch-card operators, for instance. Lind asked: “Would a tax on PCs and software have preserved their jobs? What would Gates have thought about that?”

  • Larry Light

    Larry Light is a veteran financial editor and reporter who has worked for the Wall Street Journal, Forbes, Business Week, Money, AdviceIQ and Newsday.