On March 2, 2017, Yanis Varoufakis writes on World Economic Forum:
Ken makes a decent living operating a large harvester on behalf of farmer Luke. Ken’s salary generates income tax and social security payments that help finance government programs for less fortunate members of his community. Alas, Luke is about to replace Ken with Nexus, a robot that can operate the harvester longer, more safely, in any weather, and without lunch breaks, holidays, or sick pay.
Bill Gates thinks that, to ease the inequality and offset the social costs implied by automation’s displacement effects, either Nexus should pay income tax, or Luke should pay a hefty tax for replacing Ken with a robot. And this “robot tax” should be used to finance something like a universal basic income (UBI). Gates’s proposal, one of many variants on the UBI theme, allows us to glimpse fascinating aspects of capitalism and human nature that rich societies have neglected for too long.
The whole point of automation is that, unlike Ken, Nexus will never negotiate a labor contract with Luke. Indeed, it will receive no income. The only way to simulate an income tax on behalf of Nexus is to use Ken’s last annual income as a reference salary and extract from Luke’s revenues income tax and social security charges equivalent to what Ken paid.
There are three problems with this approach. For starters, whereas Ken’s income would have changed over time had he not been fired, the reference salary cannot change, except arbitrarily and in a manner setting the tax authorities against business. The tax office and Luke would end up clashing over impossible estimates of the extent to which Ken’s salary would have risen, or fallen, had he still been employed.
Second, the advent of robot-operated machines that have never been operated by humans means there will be no prior human income to act as a reference salary for calculating the taxes these robots must pay.
Finally, it is hard philosophically to justify forcing Luke to pay “income” tax for Nexus but not for the harvester that Nexus operates. After all, both are machines, and the harvester has displaced far more human labor than Nexus has. The only defensible justification for treating them differently is that Nexus has greater autonomy.
But to what extent is Nexus genuinely autonomous in a manner that the harvester is not? However advanced Nexus might be, it can be thought of as autonomous if and only if it develops consciousness, whether spontaneously or with the help of its makers.
Only if Nexus (like the Nexus-6 replicants in the 1982 film Blade Runner) achieves that leap will “he” have earned the “right” to be thought of as distinct from the harvester he operates. But then humanity will have spawned a new species and a new civil rights movement (which I would gladly join) demanding freedom for Nexus and equal rights with Ken – including a living wage, minimum benefits, and enfranchisement.
Assuming that robots cannot be made to pay income tax without creating new potential for conflict between the tax authorities and business (accompanied by tax arbitrage and corruption), what about taxing Nexus at the point of sale to Luke? That would of course be possible: the state would collect a lump-sum tax from Luke the moment he replaces Ken with Nexus.
Gates supports this second-best alternative to making robots “pay” income tax. He thinks that slowing down automation and creating tax disincentives to counter technology’s displacement effect is, overall, a sensible policy.
But a lump-sum tax on robots would merely lead robot producers to bundle artificial intelligence within other machinery. Nexus will increasingly be incorporated within the harvester, making it impossible to tax the robotic element separately from the dumb parts that do the harvesting.
Either the robot sales tax should be dropped or it should be generalized into a capital goods sales tax. But imagine the uproar against a tax on all capital goods: Woe betide those who would diminish domestic productivity and competitiveness!
Ever since the emergence of industrial capitalism, we have been terrible at differentiating between property and capital, and thus between wealth, rent, and profits. This is why a wealth tax is so difficult to design. The conceptual problem of differentiating between Nexus and the harvester “he” operates would make it impossible to agree on how a robot tax should work.
But why make life under capitalism more complicated than it already is? There is an alternative to a robot tax that is easy to implement and simple to justify: a universal basic dividend (UBD), financed from the returns on all capital.
Imagine that a fixed portion of new equity issues (IPOs) goes into a public trust that, in turn, generates an income stream from which a UBD is paid. Effectively, society becomes a shareholder in every corporation, and the dividends are distributed evenly to all citizens.
To the extent that automation improves productivity and corporate profitability, the whole of society would begin to share the benefits. No new tax, no complications in the tax code, and no effect on the existing funding of the welfare state. Indeed, as higher profits and their automatic redistribution via the UBD boosted incomes, more funds would become available for the welfare state. Coupled with stronger labor rights and a decent living wage, the ideal of shared prosperity would receive a new lease on life.
The first two industrial revolutions were built on machines produced by great inventors in glorified barns and bought by cunning entrepreneurs who demanded property rights over the income stream “their” machines generated. Today’s technological revolution is marked by the increasing socialization of the production of capital. A practical response would be to socialize the property rights over the large income streams capital is now generating.
In short, forget about taxing either Nexus or Luke. Instead, place a portion of Luke’s equity in the farm in a public trust, which then provides a universal payment to everyone. In addition, we must legislate to improve the wages and conditions of every human still in employment, while our taxes provide Ken unemployment benefits, a guaranteed paid job in his community, or retraining.
Gary Reber Comments:
Yannis Varoufakis, the former Finance Minster of Greece, wants to see, as I do, society, meaning for me, EVERY child, woman and man, sharing in the earnings benefits brought by automation that improves the productivity and profitability of for-profit corporations.
Others, such as Bill Gates, support the idea of making robots “pay” income tax in order to “slow down” automation to counter technology’s displacement effect as it relates to job destruction. In other words, the call is to stop improving our productivity efficiencies through automation in order not to eliminate jobs. Why?
Because these people only see the means to earn an income as having a job that pays wages and salaries. Yet, to the extent that any person who is an owner of productive capital assets, they are hypocrites because their personal wealth is invested in personal ownership stakes in the corporations growing the economy, both established (such as Microsoft as in Bill Gates’ case) and viable start-ups. In other words, they are willing to be taxed but still own their non-human means of production, which is the sole source or significant source of their wealth and earnings.
Varoufakis suggests another way to counter technology’s displacement effect as it relates to job destruction, a universal basic dividend (UBD), financed from the a portion of the returns on all productive capital earnings, that would be put into a public trust with the earnings dividends distributed evenly (equally) to all citizens.
Varoufakis argues that there would be “no new tax, no complications in the tax code, and no effect on the existing funding of the welfare state. But there would be a new tax — on a “portion” of the earnings of owners (large and small business owners) of productive capital instruments, which he wants to be allocated for the “welfare state.” Not only that, but he wants labor to reap as much as possible employment that pays a decent living wage (which I do, as well), and “legislate to improve the wages and conditions of every human still in employment, while our taxes provide [any person displaced by automation] unemployment benefits, a guaranteed paid job in his community, or retraining.”
I do not think the ideal of inclusive and shared prosperity should be administered by the elites in government, who will promise more and more to become elected and more powerful. I believe we should ensure that citizens become empowered as owners of the corporations growing the economy, both established and viable start-ups, to meet their own consumption needs and that government become more dependent on economically independent citizens, thus reversing current global trends where all citizens will eventually become dependent for their economic well-being on the State and whatever elites control the coercive powers of government, using job and income dependency, the police, courts of law, prisons, the tax system and so on as their means to control.
Varoufakis sites that those who innovated and invented the automation that enabled advancing productivity and efficiencies of production in the past “demanded property rights over the income stream ‘their’ machines generated,” as if personal ownership was not a natural right. He sees as a practical response to “socialize the property rights over the large income streams productive capital is now generating.” Essentially, he is advocating for taking property rights (control) away from citizens and transferring them to the State. That, in effect, is socialism.
America was founded on the principle that the basic responsibility of government is to maximize the welfare of its citizens. The “pursuit of happiness” phrase in the Declaration of Independence was interchangeable in those times with the word “property.” The original phrasing was “the right to life, liberty and property.” “The pursuit of happiness” phrase was a substitute for the “property” phrase (not to shame those founders who were slave owners). In the forerunner of the Declaration of Independence and Bill of Rights, the 1776 Virginia Declaration of Rights declared that securing “Life, Liberty, with the means of acquiring and possessing Property” is the highest purpose for which any just government is formed.
No where does Varoufakis or other proponents of a universal basic income/dividend (UBI/UBD) use the term “ownership” or acknowledge the right in natural law to own the means of production one creates as their personal work aide or to substitute their labor with the “tools” they create.
In reality, there are two independent factors of production: humans (labor workers who contribute manual, intellectual, creative and entrepreneurial work) and non-human physical capital (productive land; structures; infrastructure; tools; machines; robotics; computer processing and apps; artificial intelligence, certain intangibles that have the characteristics of property, such as patents and trade or firm names the like which are owned by people individually or in association with others). Thus, fundamentally, economic value is created through human and non-human contributions.
People invented “tools” to reduce toil, enable otherwise impossible production, create new highly automated industries, and significantly change the way in which goods, products and services are produced from labor intensive to capital intensive — the core function of technological invention and innovation.
The solution to economic inequality and the displacement by automation of those workers is to first acknowledge that productive capital is increasingly the source of the world’s economic growth and second, to see that productive capital should therefore become the source of added property ownership incomes for all. Logically thinking, if both labor and capital are independent factors of production, and if capital’s proportionate contributions are increasing relative to that of labor, then equality of opportunity and economic justice demands that the right to property and access to the means of acquiring and possessing property must in justice be extended to all, equally.
To provide equal opportunity access to the means of acquiring and possessing property will require legislation to reform the monetary and tax system to spread more broadly the ownership of productive capital assets as the economy grows, without taking anything away from the 1 to 10 percent (until transferred after death using a transfer tax on the recipients of their wealthy estates) who now own 50 to 90 percent of the existing corporate capital asset wealth. Instead, the ownership pie would desirably get much bigger and their percentage of the total ownership would decrease, as ownership gets broader and broader, benefiting EVERY citizen (children, women and men), including the traditionally disenfranchised poor and working and middle class. EVERY citizen would become a full-voting capital asset owner in the corporations growing the economy, effectively enabling operating decisions to be made from the bottom up, eliminating the lopsided distribution of profits, and creating democratic control. Thus, productive capital income, from full corporate earnings dividend payouts, would be distributed more broadly and the demand for goods, products, and services would be distributed more broadly from the earnings of capital and result in the sustentation of consumer demand, which will promote and support environmentally responsible economic growth and more profitable and responsible enterprise. That also means that society can profitably employ unused productive capacity and invest in more “green,” environmentally productive and enhanced productive capacity to service the demands of an environmentally responsible growth economy. As a result, our business corporations would be enabled to operate more efficiency and competitively, while broadening wealth-creating, income-producing capital asset ownership participation, creating new capital owners and jobs, resulting from the growth spiral, and “customers with money” to support the goods, products, and services being produced.
To achieve this, a primary piece of legislation must be enacted, which my colleagues and I at the Center for Economic and Social Justice (www.cesj.org) call the Capital Homestead Act (aka Economic Democracy Act and Economic Empowerment Act) and monetary reform. See http://www.cesj.org/learn/capital-homesteading/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-a-plan-for-getting-ownership-income-and-power-to-every-citizen/, http://www.cesj.org/learn/capital-homesteading/capital-homestead-act-summary/ and http://www.cesj.org/learn/capital-homesteading/ch-vehicles/. And The Capital Homestead Act brochure, pdf print version at http://www.cesj.org/wp-content/uploads/2014/11/C-CHAflyer_1018101.pdf and Capital Homestead Accounts (CHAs) at http://www.cesj.org/learn/capital-homesteading/ch-vehicles/capital-homestead-accounts-chas/ and monetary justice at http://capitalhomestead.org/page/monetary-justice.
Also see the short YouTube video “People And Things” at https://www.youtube.com/watch?v=GGkH7X_u2pA&feature=share.
