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Optimal Taxation of Robots

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  • Uwe Thuemmel

Abstract

I study the optimal taxation of robots, other capital, and labor income. I show that it is optimal to distort robot adoption. The robot tax (or subsidy) exploits general-equilibrium effects to compress wages, which reduces income-tax distortions of labor supply, thereby raising welfare. In the calibrated model, when robots are expensive, a robot subsidy is optimal. As robots get cheaper, it becomes optimal to tax them. Yet, when reforming the status-quo tax system, most welfare gains can be achieved by adjusting the income tax. The additional gains from taxing robots differently from other equipment capital are close to zero.

Suggested Citation

  • Uwe Thuemmel, 2023. "Optimal Taxation of Robots," Journal of the European Economic Association, European Economic Association, vol. 21(3), pages 1154-1190.
    • Handle: RePEc:oup:jeurec:v:21:y:2023:i:3:p:1154-1190.
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    References listed on IDEAS

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    Cited by:

    1. Yunmin Chen, 2024. "Optimal dynamic nonlinear income taxation with wage regulations," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 31(4), pages 1009-1036, August.
    2. David E. Bloom & Klaus Prettner & Jamel Saadaoui & Mario Veruete, 2023. "Artificial intelligence and the skill premium," Department of Economics Working Papers wuwp353, Vienna University of Economics and Business, Department of Economics.
    3. Pablo Casas & José L. Torres, 2024. "Government size and automation," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 31(3), pages 780-807, June.
    4. Nakatani, Ryota, 2024. "Optimal Taxation in the Automated Era," MPRA Paper 121347, University Library of Munich, Germany.
    5. Ana Abeliansky & Klaus Prettner & Ernesto Rodríguez Crespo, 2024. "Climate change and automation: the emission effects of robot adoption," Department of Economics Working Papers wuwp370, Vienna University of Economics and Business, Department of Economics.
    6. Li, Jianjun & Wu, Zhouyi & Yu, Kaijia & Zhao, Wei, 2024. "The effect of industrial robot adoption on firm value: Evidence from China," Finance Research Letters, Elsevier, vol. 60(C).
    7. Nakatani, Ryota, 2022. "Optimal fiscal policy in the automated economy," MPRA Paper 115003, University Library of Munich, Germany.

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